Managed Care
Disease
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The Comeback Isn't Complete: HMOs Still Shaky

MANAGED CARE October 1999. © MediMedia USA
News and Commentary

The Comeback Isn't Complete: HMOs Still Shaky

MANAGED CARE October 1999. ©1999 MediMedia USA

The Hay Group's annual benefits report found that health insurance premiums rose 5.2 percent in 1999, but not necessarily because insurers were trying to boost their bottom lines. Rather, the consulting firm attributes most of that rise to the soaring cost of prescription drugs — up 15 percent, by Hay's estimate.

Though the year began with promise that the managed care industry would use higher premiums to rebound from poor performances in 1997 and '98, several large HMOs are still looking for the turning point.

In New England, Harvard Pilgrim lost $49 million in the first six months of the year, and CEO Charles Baker has embarked on a smaller-is-better strategy that reportedly includes laying off hundreds of workers and shedding its business in Rhode Island, on top of forthcoming 12- to 15-percent rate hikes.

Despite a 10-percent boost in premium revenues, Minnesota HMOs collectively lost $9.6 million last year, according to consultant Allan Baumgarten's Minnesota Managed Care Review. Another Baumgarten study found that Illinois HMOs lost $71 million on lower revenues and higher medical costs. And in Texas, state statistics show that HMOs lost $34 million in the second quarter — among them, Blue Cross and Blue Shield of Texas, which is buying the perpetually profitable NYLCare units that Aetna U.S. Healthcare is spinning off in Dallas and Houston.