HMO Profitability Still A Mixed Bag

June 18, 2001 ( - After a six year run of some of the most trying in the industry, nearly half (46%) of the 525 HMOs evaluated by Weiss Ratings are still losing money - a point of interest to both plan sponsors and covered employees.

The $32.8 billion in premiums represented by those plans is 29% of total industry premiums.

Signs of Life?

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On the other hand, Weiss found that that forty-five health maintenance organizations (HMOs) consistently maintained good financial health during the period. But that was just 8.6% of the 525 plans reviewed, though they also constituted 26% of the industry’s total premiums of $113 billion as of September 30, 2000.

For the first nine months of 2000, the HMO industry recorded total profits of $908.8 million, a significant turnaround from the net loss of $13.7 million for the same period a year ago.

Turbulent Times

From January 1995 to September of 2000, 57 HMOs failed, the highest failure rate of any financial industry, according to the report. Profits began declining in 1995, culminating in three years of heavy losses from 1997 to 1999 when HMOs lost a total of $1.8 billion.

Today just 19% of the firms are rated B- or higher, compared to 48% in 1995.

Among the 45 HMOs that maintained good financial health, 22 are relatively small, with less than 100,000 members.

– Nevin Adams