HMOs: Many Bleeding Red Nationwide
Most HMOs in Alabama began losing money four years ago and have "not seen [their] books in the black since that time," the Mobile Register reports. What's more, two of every three HMOs received administrative warnings from the state Insurance Department last year. Elizabeth Bookwalter, who oversees HMOs for the department, said many of the HMOs "found themselves under tight scrutiny because regulators did not like the looks of their books." Byron McCain of the Alabama Association of Health Maintenance Organizations said every health plan "had a rough time last year when premiums collected were weighed against claims paid" (Clark, 3/19).
The outlook isn't much brighter for Colorado HMOs, half of which lost money last year even after raising premiums by as much as 25%, according to state insurance department records. "It would seem that even though premiums went up, medical costs went up even faster," said Colorado Managed Care publisher James Hertel. "It indicates we're at the beginning of an upswing in the insurance (pricing) cycle," he said. Half of the state's 18 HMOs lost money last year, but four HMOs "heavily weighted" the losses -- Blue Cross Blue Shield's HMO Colorado ($20.6 million), United HealthCare ($12.1 million), Kaiser Permanente ($10.6 million) and QualMed of Colorado ($8 million). Overall, HMOs in Colorado lost $23 million last year, compared with a profit of nearly $20 million the previous year (Conklin, Rocky Mountain News, 3/23).
But even more alarming is news that three Colorado HMOs "didn't have enough cash on hand" to meet the insurance department's "risk-based capital analysis" standard in 1998, the first year the National Association of Insurance Commissioners applied the standard to HMOs. The Denver Post reports that Colorado does not require HMOs to comply with the RBC analysis, but a bill in the state Legislature, which is expected to receive the governor's approval, would. Nancy Litwinski, assistant commissioner for financial regulation, said HMOs in the state are voluntarily complying with the rule for now, meaning that if they fall below the mandated level of reserves, they must tell the state how they plan to get back into compliance. United HealthCare said it met the RBC requirement by moving money from other states to Colorado, and QualMed said it should be in compliance by the end of the month. Prudential did not return phone calls, but Litwinski said the plan is based in Texas and governed by that state's compliance laws (Hubler, 3/23).