Weiss Ratings


HMOs' Profits Climb 81% to $5.5 Billion in 2002
Medicare+Choice Earnings Up 117.7%

JUPITER, Fla., December 10, 2003 — The nation's HMOs [1] reported an 81 percent increase in profits for 2002, earning $5.5 billion for the year, compared to $3 billion in 2001, according to Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

HMOs reporting the largest year-over-year increases in earnings include:

Company

Headquarters

Weiss
Safety
Rating

Net Profit (Loss)

2002
($Mil)

2001
($Mil)

$
Change

Southwest Texas HMO, Inc.

Richardson, Texas

C+

55.1

-222.1

277.3

Empire Healthchoice Assurance, Inc.

New York, N.Y.

A-

248.5

98.4

150.1

Blue Cross of California

Thousand Oaks, Calif.

A

434.6

314.8

119.8

Blue Cross Blue Shield United of Wis.

Milwaukee, Wis.

C+

116.4

-1.5

117.9

Blue Cross Blue Shield of Michigan

Detroit, Mich.

B

161.3

56.1

105.2

Weiss Safety Rating: A = Excellent, B=Good, C=Fair, D=Weak, E=Very Weak

"Profitability continues to improve as insurers raise premiums and restructure policies to reduce costs," commented Melissa Gannon, vice president of Weiss Ratings, Inc. "While this bodes well for the industry's overall health, rising premiums have forced many consumers to select more restrictive health plans or opt not to purchase insurance entirely."

Medicare+Choice Profits Up

In analyzing the profitability of HMOs, Weiss found that profits from the industry's Medicare+Choice line of business improved 117.7 percent, earning $1 billion in 2002 compared to $462.9 million in 2001. [2] The line's improved performance was due to the discontinuance or reduction of costly Medicare+Choice plans by many insurers and the enactment of the 1999 Balanced Budget Refinement Act (BBRA), which resulted in higher reimbursement rates.

Likewise, as seniors have left or been dropped by their Medicare+Choice plans and returned to traditional Medicare, HMOs have capitalized on the increased need for Medicare supplement insurance (Medigap). This has resulted in a 90.6 percent increase in Medigap profits in 2002, climbing to $270.5 million from $141.9 million in 2001.

HMOs reporting the largest increases in Medicare+Choice profits include:

Company

Headquarters

Weiss
Safety
Rating

Medicare+Choice
Underwriting Profit (Loss)

2002
($Mil)

2001
($Mil)

$
Change

Health Insurance Plan of Greater NY

New York, N.Y.

B+

102.0

30.5

71.4

Pacificare of Arizona, Inc.

Phoenix, Ariz.

B-

38.3

-16.6

54.9

United Healthcare of Florida, Inc.

Maitland, Fla.

C-

25.4

-27.6

53.0

Health Options, Inc.

Jacksonville, Fla.

B+

48.2

4.8

43.4

Aetna Health, Inc. (A New Jersey Corp.)

Fairfield, N.J.

B-

26.6

-13.9

40.5

Weiss Safety Rating: A = Excellent, B=Good, C=Fair, D=Weak, E=Very Weak

Of the 544 HMOs studied, Weiss found that only 136 companies, or 25 percent, reported a loss in 2002 compared to 36.6 percent of insurers in 2001. The overall strength of the industry was also evident by across-the-board improvements among HMO size categories. Nearly 71 percent of small companies — those with fewer than 100,000 enrollees — reported profits in 2002 compared to only 55.9 percent in 2001 and 48.7 percent in 2000.

Notable Upgrades and Downgrades

Of the 513 HMOs reviewed by Weiss using year-end 2002 data, 182 companies were upgraded, while 38 were downgraded. Notable upgrades include:

Notable downgrades include:

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 insurance companies, banks, and brokerage firms. Weiss also rates the risk-adjusted performance of more than 12,000 mutual funds and more than 8,000 stocks. Weiss Ratings is the only major rating agency that receives no direct or indirect compensation from the companies it rates for issuing its ratings. Revenues are derived strictly from sales of its products to consumers, institutions, businesses, libraries, and governmental agencies.

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] Analysis based on insurers that filed a NAIC Health Statement or a California Health Care Service Plan statement. Other insurers offer health insurance, but are not included in this analysis. Please refer to Weiss Ratings' Life & Health releases for additional health insurance studies and/or companies at www.WeissRatings.com.

[2] Figures do not include California companies since California Health Care Service Plan statements do not break out the numbers for these lines of business.

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