A.M. Best Special Report: Medicare Advantage Plans Lead HMO Financial Impairments in 2007
February 2nd, 2009
2009 FEB 2 -- The five health maintenance organization (HMO) financial impairments of the past two years have predominantly involved private-sector Medicare Advantage or Medicaid companies.
Although the impairment count of three in 2007 and two through third quarter 2008 is low compared with the late 1990s and early 2000s—when at their peak, nearly one in 26 companies became impaired—any impairment can cause the displacement of thousands of individual HMO members.
Most of the impairments in this updated study were small single-state HMOs that specialized in the Medicare and Medicaid markets.
Most financial impairments among HMOs result from modest to minimum levels of capital within the organization. Smaller HMOs that expand too fast and/or misprice their products generally are not able to capitalize their operations quickly enough to keep up with their rising membership.
Three of the five companies impaired in 2007-2008 were Medicare Advantage or Medicaid HMOs that were two years old or less, and the fourth plan was four years old. Another commercial HMO had been in operation for four years.
A.M. Best found that the Medicare plans accounted for almost 10% of HMO enrollments, but they generated 27% of the premiums. Medicaid, on the other hand, accounted for 25% of the HMO population and accounted for about 16% of the premiums.
HMO operating results generally have been trending favorably over the past five years, with modest gains in pretax operating income and underwriting income posted in 2007. These results have been supported by the fairly stable health care expense and administrative expense ratios. BestWeek subscribers can download a PDF copy of all full special reports or a combination of the report and all related spreadsheet files of the report data at no charge at www.bestweek.com.
Nonsubscribers can visit www.bestweek.com for pricing information or call customer service for more information at (908) 439-2200, ext. 5742. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
Keywords: Medicare and Medicaid, HMO, Health Insurance, Health Maintenance Organizations, Health Policy, Medicaid, Medicare, A.M. Best Co.
This article was prepared by Managed Care Weekly Digest editors from staff and other reports. Copyright 2009, Managed Care Weekly Digest via NewsRx.com.
