WEISS RATINGS

HMOs' and Health Insurers' Profits Increase 25%
to $4.1 Billion in 2001
Blue Cross Blue Shield Plans Drive Increase with $2.9 Billion Profit

PALM BEACH GARDENS, Fla., September 3, 2002 - The nation's HMOs and health insurers 1 reported a 25 percent increase in profits for 2001, earning $4.1 billion for the year, compared to $3.3 billion in 2000, according to research by Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds and stocks.

In analyzing the industry's profitability, Weiss found that Blue Cross Blue Shield plans as a group produced a $2.9 billion profit, or 70 percent of the industry's $4.1 billion aggregate net earnings. This represents a 40 percent increase over the Blues' $2 billion profit recorded in 2000. Of the 54 Blues plans, 49, or 90.7 percent, reported a profit in 2001, up from the 85.2 percent of plans reporting a profit in 2000. Blues plans reporting the largest 2001 profits include:

Blue Cross Blue Shield Plan Weiss
Safety
Rating
Net Profit (Loss)
2001
($Mil)
2000
($Mil)
%
Change
Anthem Insurance Companies, Inc. B- 406.9 91.7 343.9
Health Care Service Corporation a Mut Leg Res B+ 387.1 173.8 122.8
Blue Cross of California A 314.8 349.6 -9.9
Community Insurance Company C 107.6 11.0 880.9
Blue Cross Blue Shield of Mass. B+ 103.7 109.0 -4.9
Weiss Safety Rating: A = Excellent, B=Good, C=Fair, D=Weak, E=Very Weak

The five Blues plans reporting losses in 2001 were:

Blue Cross Blue Shield Plan Weiss
Safety
Rating
Net Profit (Loss)
2001
($Mil)
2000
($Mil)
%
Change
Blue Cross Blue Shield of Kansas, Inc. C+ -47.6 12.5 -480.9
Blue Cross Blue Shield of Minnesota B+ -39.3 42.1 -193.4
Blue Cross Blue Shield of Kansas City B- -7.7 -3.9 -97.6
Regence Blue Cross Blue Shield Oregon B- -6.1 3.5 -275.8
Blue Cross Blue Shield United of Wisconsin C- -1.6 -28.2 94.4
Weiss Safety Rating: A = Excellent, B=Good, C=Fair, D=Weak, E=Very Weak

"Like HMOs, Blues plans have benefited from rate increases over the last several years," commented Melissa Gannon, vice president of Weiss Ratings, Inc. "However, with a more diversified product line, the Blues are positioned to take advantage of the public's dislike of HMOs by also offering PPOs, point of service products, and traditional indemnity plans."

Meanwhile, 2001 profits at the nation's 470 HMOs declined to $1.01 billion, representing a 6.87 percent decrease from the $1.08 billion recorded in 2000. Texas HMOs trailed the rest of the nation, reporting an aggregate loss of $477 million, followed by Kansas where HMOs posted an aggregate loss of $53 million. In contrast, New York and California HMOs reported the highest aggregate earnings at $702 million and $611 million, respectively.

"This mild profit decline is not of great concern but may be a sign that increasing medical costs are beginning to outpace the rate increases of the past few years," said Ms. Gannon.

Profits at other traditional indemnity health insurers posted a 54 percent year-over-year increase, showing a net profit of $202 million in 2001, up from $131 million in 2000.

Notable Upgrades and Downgrades

Of the 528 HMOs and health insurers rated based on an analysis of year-end 2001 data, Weiss upgraded 160 and downgraded 48. Notable upgrades include:

• Empire Healthchoice, Inc. (N.Y.) from C+ to B+
• Blue Cross Blue Shield of Minnesota from B to B+
• Keystone Health Plan East, Inc. (Pa.) from B to B+

Notable downgrades include:

•United Healthcare of Florida, Inc. from C to D+
• United States Healthcare Systems Pa. from B to B-
• Kaiser Foundation Healthplan Mid-Atlantic States (Md.) from C to C-

The Weiss Safety Ratings are based on an analysis of a company's risk-adjusted capital, five-year historical profitability, quality of investments, 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 15,000 financial institutions, including life and health insurers, HMOs, Blue Cross Blue Shield plans, property and casualty insurers, banks, and brokers. Weiss also rates the risk-adjusted performance of more than 11,000 mutual funds and 7,000 stocks. 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 needing more information on the financial safety of a specific company can purchase a rating and summary analysis for as little as $7.95 through www.WeissRatings.com, or starting at $15 by calling 800-289-9222.


1 Companies defined as those that filed the 2001 NAIC Health Annual Statement, those that filed the 2001 California HMO statutory statement, and all Blue Cross Blue Shield plans. The first category is comprised of all companies that previously filed as HMOs and HMDIs, some companies that previously filed as Life and Health insurers, and some companies that previously filed as Property and Casualty insurers.

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