HMOs lost $1.25 billion in 1998 — 45 percent worse than the industry's performance in '97, according to an analysis by A.M. Best, the insurance rating agency. The 600 HMOs studied had a collective revenue increase of nearly $1.2 billion, despite the profitability decline.
Though 1999 began with optimism, these are still difficult times for some plans. In Texas, HMOs lost $414 million in the first nine months of '99, surpassing the $400 million lost in all of 1998. The state insurance commissioner says losses were particularly acute in the third quarter, during which HMOs lost $185 million.
Higher use of medical and pharmacy services are to blame; average per-member, per-month expenses increased nearly $10 from April to June alone, while premiums increased, on average, only $3. Harris Methodist Health Plan tops the list of HMOs that lost money during the third quarter, at $32 million.