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As HMOs Recover, Signs Emerge That 1999 Could Be a Good Year

MANAGED CARE March 1999. © MediMedia USA
News and Commentary

As HMOs Recover, Signs Emerge That 1999 Could Be a Good Year

MANAGED CARE March 1999. ©1999 Stezzi Communications

Several large HMOs that have experienced financial turmoil in recent times appear to be either recovering or downright healthy. Earnings for Aetna U.S. Healthcare, the nation's largest HMO, rose 40 percent during the fourth quarter of 1998, while costs remained stable in its commercial lines and increased only moderately in its Medicare business. Aetna had spent 1997 and the early part of 1998 with a financial hangover dating to its 1996 acquisition of U.S. Healthcare.

Another for-profit giant, Oxford Health Plans, whose stock fell hard in 1997 and 1998, says it could return to profitability before the end of this year. Oxford's hopes for a comeback got a boost when more accounts than expected renewed in January. Oxford is re-entering the Medicare market, too, after a six-month suspension.

Humana ended a wild ride in 1998 by finishing $57 million ahead of the game. Earlier in the year, Humana shares tumbled 30 percent when its proposed merger with United HealthCare ran aground, following United's 11th-hour disclosure of its own financial woes.

Perhaps the most remarkable turnaround is occurring at Kaiser Permanente. Just two years after posting a stunning $270 million one-year loss, the nation's biggest not-for-profit HMO expects premium hikes and cost-cutting measures to push it back into the black. Kaiser Permanente predicts a 2-percent margin for 1999.