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Life Health > Health Insurance

Weiss: HMOs Return To Profitability

By Staff Writer

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NU Online News Service, Aug. 6, 10:52 a.m. – Weiss Ratings Inc., Palm Beach Gardens, Fla., an independent insurance rating service, says a study of 492 health maintenance organizations shows the U.S. HMO industry turned a profit in 2000.

The profit is the first the HMO industry has reported since 1996, Weiss says.

The 492 HMOs earned a total of $990 million in 2000, compared with a cumulative loss of $1.8 billion from 1997 to 1999.

After the HMO industry posted $1.8 billion in profits in 1995, aggregate HMO profits plummeted due to rising health care costs and growing consumer demand for more flexible plans, Weiss says.

Starting in 1999, large HMOs began restoring profitability by boosting rates and shedding unprofitable lines, Weiss says.

At the same time, more than 100 HMOs either dissolved or merged from 1999 to 2000. The sector’s recovery continued through the end of 2000, Weiss says.

“This is not only good news for the HMOs themselves, it’s also a positive for consumers who count on their HMO to be financially healthy and stay in business,” says Weiss Ratings Chairman Martin Weiss. “But the improvements have not come without costs to the consumer, such as premium hikes and service cutbacks, and they have not been evenly distributed across the industry. In fact, more than one-third of HMOs are still considered vulnerable.”

Premium rates increased by more than $300 per enrollee, to $1,842 in 2000, from $1,506 in 1995.

Medicare HMOs dropped 1.6 million seniors were dropped between 1999 and 2001, and many were forced to seek health coverage elsewhere, Weiss says.

Moreover, uncertainties remain. The Weiss study found that the 31 largest HMOs generated most of the profits. The big HMOs reported a total net profit of $1.2 billion in 2000.

The 461 other HMOs reported an aggregate net loss of $258 million.

Weiss argues that 194 HMOs, or 41% of the total, are still vulnerable.

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