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Texas HMOs Told To Get Profitable Or Risk Closure

MANAGED CARE June 1999. © MediMedia USA
News and Commentary

Texas HMOs Told To Get Profitable Or Risk Closure

MANAGED CARE June 1999. ©1999 Stezzi Communications

Texas Gov. George W. Bush has imposed tougher health plan solvency levels, after HMOs in the state posted enormous losses last year.

The bottom line: Health plans have until 2002 to take whatever steps to break even or risk being put out of business by regulators. Under terms of the new law, medical HMOs must have a minimum net worth of $1.5 million. Previously, HMOs had to keep $1.5 million cash in reserve, but nothing in the law required them to set aside money to cover liabilities, including provider payments. The new solvency requirements were requested by the state insurance department after WellChoice HMO collapsed last December.

Meanwhile, the Texas legislature is working to revive the state's independent review process. The Senate unanimously passed a bill that would restore the process, but make it optional for HMOs. At press time, the bill was expected to pass the House.

A federal judge nixed mandatory external review as part of her ruling in an HMO liability case last year. If an appeals court upholds her ruling, the new bill, if passed, would take effect. But if it is nullified, mandatory HMO participation would resume.

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