WEISS RATINGS

PALM BEACH GARDENS, Fla., October 25, 1999 — Ten of the nation's HMOs, covering over 533,000 members, are believed to be at high risk of failure due to continuing losses and capital deficits, according to a study by Weiss Ratings, Inc., the nation's only provider of ratings for most HMOs. The 10 HMOs, all receiving a Weiss Safety Rating of E- ("very weak"), are:

"With 10 plans at risk, plus 14 others that have already failed this year, the industry shakeout we've been warning about is now clearly here," commented Martin D. Weiss, Ph.D., chairman of Weiss Ratings, Inc. "The silver lining is that this may be the end of a two-year decline in industry profits."

Large HMOs Profitable During First Quarter; Small HMOs Still Losing Money

Among large HMOs, serving a total of 66 million members in America, most returned to profitability in the first quarter of 1999, earning a total of $274 million. However, among the nation's 322 smaller HMOs, serving more than ten million members, 161, or half, continued to lose money, producing a total net loss of $51 million among the 322 companies. ¹

Dr. Weiss added: "The first quarter improvement by large HMOs is encouraging. But to solidify the trend, we’d like to see continuing profits in subsequent quarters, along with broader participation by the smaller HMOs, especially the 161 that are still reporting losses."

Illinois' HMOs Most Consistently Profitable; North Carolina's Least

Among the states with ten or more HMOs reviewed in the study, Illinois companies were the most consistently profitable, with all 16 reporting profits during the period. Other states with a majority of profitable plans include Kentucky (9 of 11), California (20 of 26), and Colorado (12 of 17).

In contrast, 11 of North Carolina’s 17 HMOs lost money, while other states with a majority of non-profitable companies were Tennessee (12 of 19 lost money), Missouri (10 of 18), and Ohio (13 of 24).

In dollar terms, California's 26 HMOs (including some of the nation's largest) earned the most, with $168.5 million in profits, while Texas' 51 plans lost the most, reporting a total of $9.9 million in losses.

Notable Upgrades and Downgrades

Of the 470 HMOs reviewed overall, 21 received rating upgrades, while 42 were downgraded based on an analysis of first quarter 1999 data.

Notable upgrades include:

Notable downgrades include:

Weiss analyzes a company's risk-adjusted capital, five-year historical profitability, liquidity, and stability. The latter category combines a series of factors including asset growth, premium growth, strength of affiliate companies, and risk diversification.

Weiss issues safety ratings on more than 16,000 financial institutions, including HMOs, life and health insurers, Blue Cross Blue Shield plans, property and casualty insurers, banks, and brokers. Weiss also rates the Y2K preparedness of many insurers, banks, and large corporations, as well as the risk-adjusted performance of more than 5,000 mutual funds. Weiss Ratings is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses, and libraries.

Consumers who need more information on the financial safety of a specific company may purchase a rating or analysis directly from Weiss for as little as $15 by calling 1-800-289-9222. Weiss Safety Ratings are also available at many public libraries.

The Strongest and Weakest HMOs in the U.S.