WEISS RATINGSTen HMOs Fall Below NAIC Guidelines For Financial Stability
Capital levels for industry improve overall;
Weiss gives "very weak" ratings to 78 HMOs
PALM BEACH GARDENS, Fla., October 30, 2000 — Ten Health Maintenance Organizations have failed to meet the guidelines recently adopted by the National Association of Insurance Commissioners (NAIC) for the minimum capital level needed to maintain financial stability, according to a study of 572 HMOs by Weiss Ratings, Inc., the nation's leading provider of HMO ratings.
Based on the reports the HMOs filed with their state commissioners, the largest companies below the capital guidelines include Bluegrass Family Health, Inc. (Ky.), Harris Methodist Texas Health Plan (Texas), and Health New England, Inc. (Mass.).
Separately, based on its own rating criteria, Weiss gave its lowest "E" ratings to 78 HMOs it deemed "very weak" financially, including Harvard Pilgrim Health Care Inc. (Mass.), Omnicare Health Plan (Mich.), Great Lakes Health Plan Inc. (Mich.), and Alliance Health Network (Pa.). Plus Weiss assigned its "D" grade to 162 HMOs considered "weak."
"Among all the industries we rate, including banks, insurers and brokerage firms, HMOs currently have the largest percentage of endangered institutions," commented Martin D. Weiss, Ph.D., chairman of Weiss Ratings. "What's worrisome is that these financial pressures can sometimes impinge upon the quality of care afforded to consumers, or, in a failure, potentially leave them stranded."
The NAIC established that HMOs should maintain at least 70 cents in adjusted capital on hand for each dollar of "target capital" -- the amount the NAIC deems necessary to cover the HMO's risks. At the same time, according to the NAIC's model law, HMOs that fail to meet these guidelines should be placed under regulatory control. Currently, however, only thirteen state legislatures are in the process of implementing some form of the NAIC's proposals.
Overall Industry Capital Increases 10%; Net Income Rises 27%
On the positive side, the total capital of the 572 HMOs actually improved by 10% to $12.9 billion in the first quarter of 2000, as compared to the year earlier period.
"Any increase in capital—the company's first defense against failure—is a welcome improvement." Dr. Weiss added.
Supporting the growth in capital was a 27% increase in the industry's net income to $299 million in the first quarter of 2000, compared to $235 million in the first quarter of 1999. The aggregate results in all size categories -- except HMOs with less than 100,000 members -- were in the black for the period.
However, the distribution of profits in the industry was still uneven: Among the 572 HMOs reviewed in the study, 252, or 44%, reported losses for the first quarter of 2000.
Ratings Distribution and Notable Upgrades/Downgrades
Only one of the 527 HMOs rated by Weiss -- Health Alliance Plan of Michigan -- earned an "A" rating (excellent) while Partners National Health Plans of North Carolina, Blue Cross of California, and Blue Shield of California each earned an A- (also excellent). The full distribution of the Weiss Safety Ratings for HMOs is as follows:
Distribution of Weiss Safety Ratings For HMOs
|A and A- (excellent)||4||0.8%|
|B+, B, B - (good)||87||16.5%|
|C+, C, C- (fair)||196||37.2%|
|D+, D, D- (weak)||162||30.7%|
|E+, E, E- (very weak)||78||14.8%|
The review of first quarter data resulted in 23 receiving rating upgrades, while eight were downgraded.
|Notable upgrades include:|
|• Alameda Alliance for Health (Calif.)||From C+ to B-|
|• Health Plan of San Joaquin (Calif.)||From D+ to C|
|• Americhoice of Pennsylvania (Pa.)||From C+ to B-|
|Notable downgrades include:|
|• Health Options Connect Inc. (Fla.)||From C- to E-|
|• Proacta Health Partners (Colo.)||From C- to D+|
|• Qualmed Plans for Health Inc. (N.M.)||From C to D|
The Weiss HMO ratings are based primarily on Weiss's own risk-adjusted capital formulas, developed in 1994. Weiss also analyzes a company's 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.
In addition to HMOs, Weiss issues safety ratings on more than 16,000 financial institutions, including life and health insurers, Blue Cross Blue Shield plans, property and casualty insurers, banks, and brokers. Weiss also rates the risk-adjusted performance of more than 10,000 mutual funds. It 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 needing 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.
HMOs Failing To Meet Regulatory Capital Guidelines Proposed
by the National Association of Insurance Commissioners (NAIC)
|Bluegrass Family Health Inc. (Ky.)||E||55.10|
|Community Health Choice Inc. (Texas)||E-||39.56|
|Grand Valley Health Plan Inc. (Mich.)||E+||55.46|
|Harris Methodist Texas Health Plan (Texas)||D||52.55|
|Health New England Inc. (Mass.)||E||66.71|
|Health Options Connect Inc. (Fla.)||E-||46.65|
|Healthcare Oklahoma Inc. (Okla.)||E||36.58|
|HUM Healthcare Systems, Inc. (N.Y.)||E-||25.99|
|Wellcare of Connecticut (Conn.)||E-||34.76|
|Yellowstone Community Health Plan (Mont.)||E+||41.62|
Source: Weiss Ratings, Inc., October 30, 2000
HMOs with Weiss Safety Rating of E-
(lower tier of "very weak" category)
|Advantage Health Plan Inc (La.)||E-|
|Alliance Health Network (Pa.)||E-|
|Beacon Health Plans Inc (Fla.)||E-|
|California Pacific Medical Group (Calif.)||E-|
|Carelink Community Health Partners (Del.)||E-|
|Community Health Care Systems Inc (Fla.)||E-|
|Community Health Choice Inc (Texas)||E-|
|Florida First Health Plan (Fla.)||E-|
|Great Lakes Health Plan Inc (Mich.)||E-|
|Harvard Pilgrim Health Care Inc (Mass.)||E-|
|Health Options Connecticut Inc (Fla.)||E-|
|Heartland Health Plan of Oklahoma (Okla.)||E-|
|HUM Healthcare Systems Inc (N.Y.)||E-|
|Integrity Health Plan of Mississippi (Miss.)||E-|
|Memphis Managed Care Corp (Tenn.)||E-|
|Mississippi Select Health Care LLC (Miss.)||E-|
|North American Healthcare Inc (N.Y.)||E-|
|Omnicare Health Plan (Mich.)||E-|
|PrimeHealth Inc (Ala.)||E-|
|PrimeHealth of Alabama Inc (Ala.)||E-|
|PriorityPlus of California Inc (Calif.)||E-|
|Wellcare of Connecticut (Conn.)||E-|
|Wellcare of New York Inc (N.Y.)||E-|
Source: Weiss Ratings, Inc., October 30, 2000
15430 Endeavour Drive, Jupiter, FL 33478 · (561) 627-3300 · www.weissratings.com