HMO HEALTH: Kaiser Permanente, PacifiCare, Wellpoint Earnings Robust
Kaiser Permanente continued to lose money during the third quarter of 1999, but at a reduced rate, due in large part to double-digit premium increases implemented last January, the Los Angeles Times reports. Although the not-for-profit giant, with 6 million members in California, reported a net loss of $29 million for Q3, the news is considered a significant "turnaround" for the company; during the same period last year Kaiser lost $89 million. The gross loss for Q3 99 was $45 million, but $16 was offset by income from investments. A majority of the loss is blamed on the company's "failing divisions" in New England and North Carolina. Excluding those systems currently being sold, Kaiser would have posted an operating income of $107 million. Dale Crandall, executive VP and CFO of Kaiser, said, "Our financial performance has improved significantly since last year, an indication that our efforts to turn the organization around are taking hold." Key components of the HMO's turnaround plan were decisions to raise premiums, postpone several capital improvement projects and further reduce of the number of patients sent to non-Kaiser hospitals. Last year at this time, the HMO had a net loss of $141 million and closed out 1998 with a net loss of $288 million. Pat Macht, spokesperson for the California Public Employees' Retirement System (CalPERS), "welcomed the news" but warned consumers could face even higher premiums as part of the continuing rebound. Macht said, "I would call this a glimmer of hope, but far from enough to give the benefits-purchaser community something to bank on in the way of stable or declining premiums" (Bernstein, 11/3).
PacifiCare Wellpoint Doing Well
As health care premiums started to rise, PacifiCare Health Systems Inc. and WellPoint Health Networks also reported higher than expected third-quarter earnings last week, the Los Angeles Times reports. Santa Ana-based PacifiCare, the nation's largest HMO, saw its operational profits increase 12% to $71 million -- $1.58 per share -- compared to $63.4 million last year, while the insurer's revenue totaled $2.52 billion, a 4.9% increase from $2.4 billion last year. Thousand Oaks- based WellPoint's operational profits climbed 14% to $76.2 million -- $1.11 per share -- compared to last year's profit of $66.7 million, while the company's revenue totaled $1.89 billion, up 16% from last year's $1.63 billion. While Medicare HMOs continue to be a money-losing proposition for insurers, PacifiCare, the nation's largest Medicare HMO operator, has dropped 26,000 Medicare HMO customers since the beginning of this year and plans to leave other HMO Medicare markets next year. Although shares have decreased amidst recent investor fears over class-action lawsuits aimed at large insurers, the Times reports that the recent financial success of these two insurers is "a sign that ... major health insurers are managing to raise premiums faster than medical costs increase" (10/28).
WellPoint Subsidiary Awarded
Continuing the good news for WellPoint, company subsidiary Blue Cross of California has received a grant and two prestigious awards for outstanding care for rural and low-income patients. Blue Cross received a $1.2 million grant from the California Managed Risk Medical Insurance Board's Healthy Families Program that will establish more telemedicine sites in locations with large numbers of seasonal and migrant workers, expand mental health and substance abuse treatment programs in rural areas and expand its "Health on Wheels" program. In addition, the Blue Cross Blue Shield Association awarded national honors to Blue Cross of California's "See a Specialist Across the Street, or Across the State: A Telemedicine Demonstration Project" in the innovations category and its "Community Resource Centers: Facilitating Plan Provider Interface" program in the provider relationship program. The awards recognize programs developed by Blues plans for their excellence in medical management (WellPoint release, 11/1).