HMO FINANCES: Most Floundered in Red Last Year
Fifty-six percent of HMOs lost money last year, down slightly from 57% in 1997, according to a study released yesterday by Palm Beach Gardens, FL-based Weiss Ratings. The 576 HMOs analyzed in the survey lost an aggregate $490 million, down from $768 million the previous year. One hundred failed to "have enough fiscal reserves as called for under guidelines set by the National Association of Insurance Commissioners." Chair Martin Weiss, head of Weiss Ratings, said, "This is not good news for the consumer. The industry has a long way to go before consumers are safe." As higher premiums led to health plans' narrower losses in 1998, the "industry's financial health should improve again this year as a result of many plans raising premiums by more than 5 percent and curtailing coverage of Medicare recipients," he said. The biggest contributor to the industry's overall losses was United HealthCare, which lost $174.6 million. Prudential HealthCare lost almost $60 million, while Aetna dropped $15.9 million (Galewitz, AP/Washington Times, 8/10).
Don't Mess with Texas?
The Ft. Worth Star-Telegram reports that the bulk of the industry losses -- $300 million -- were reported in Texas. The Texas Department of Insurance said in a separate report that Texas HMOs lost $333 million. Both Weiss Ratings and the state agency agreed that the biggest Texas contributors to the red tide were Harris Methodist Health Plan, which lost $99.1 million, and Prudential. Bob Watkins, a consultant with PricewaterhouseCoopers, said such losses encourage consolidation, as Harris is still seeking a suitor and Prudential has just completed a sale to Aetna. A new state solvency law will require health plans to have a net worth of $1.5 million -- a threshold that would elude five plans as of now, according to a department spokesperson (Lunday, 8/10).