Texas HMOs Make Money, But Lose Ground

December 9, 2002 (PLANSPONSOR.com) - Rising costs and reduced availability have continued to erode health maintenance organization (HMO) enrollment in the Lone Star State.

According to Texas Managed Care Review 2002, Allan Baumgarten’s fourth annual report assessing the Texas health care market, enrollment in Texas HMOs dropped 11.3% in the first six months of 2002 on top of a 7.9% drop in 2001.   Most of the decrease came in commercial plans, as employers facing large premium increases sought other health benefit options, according to the report.

HMOs increased their average premium revenues by 18.9% in 2001.   The report notes that HMOs were able to get employers to pay that much more partly because there are fewer competitors in the market, with several large HMOs having gone out of business or acquired by other plans in the past three years.

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Despite the increase in premium increases, HMOs continue to face upward pressure on their medical expenses. In 2001 HMOs spent an average of 93.0% of their premium revenues on health care expenses, compared with 87.9% in 1996, according to the report.

Last year Texas HMOs lost $470.1 million, or 5.9% of revenues of $8 billion. In the five years from 1997 to 2001, they lost an accumulated total of $2 billion. The report notes that results for the first half of 2002 were somewhat better, with group losses of just $48 million.   In fact, most HMOs actually were profitable for those two quarters.

Excerpts from the report, including “Texas HMOs at a Glance” exhibit can be viewed in the State Reports section of http://www.allanbaumgarten.com .