Weiss Ratings


HMOs Earn $10.2 Billion in 2003, Nearly Doubling Profits
Blue Cross Blue Shield Plans Report 63% Jump in Earnings

JUPITER, Fla., August 30, 2004 — The nation's HMOs[1] nearly doubled their profits during 2003, earning $10.2 billion, an 86 percent increase over the $5.5 billion reported in 2002, according to Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

In analyzing HMOs' earnings, Weiss found that one company, Kaiser Foundation Health Plan, reported a $1.1 billion increase in net profit, which represents one-fifth of the industry's net profit improvement. The increase is a result of regulatory changes that required the company to consolidate its year-end financial statements for all entities owned, including hospitals and provider groups. HMOs reporting the largest year-over-year increases in earnings were:

Company

Headquarters

Weiss Safety Rating

Net Profit (Loss)

2003
($Mil)

2002
($Mil)


$ Change

Kaiser Foundation Health Plan Inc

Oakland, Calif.

B-

995.5 -117.5

1,113.1

Blue Cross Blue Shield of Michigan

Detroit, Mich.

B

374.4

161.3

213.1

Group Health Cooperative

Seattle, Wash.

A

187.8

-6.9

194.7

California Physicians Service

San Francisco, Calif.

A-

314.2

142.6

171.6

Aetna Health Inc (a Florida Corp)

Tampa, Fla.

C

129.8

-40.2

170.0

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

"The industry's soaring profits continue to irk both consumers and businesses who are shouldering skyrocketing healthcare costs without any perceived improvement in benefits," commented Melissa Gannon, vice president of Weiss Ratings, Inc. "We may soon see the next wave of consumer backlash forcing HMOs to evolve their cost structures."

Regionally, Delaware HMOs trailed the rest of the nation, reporting an aggregate loss of $15.8 million, followed by Utah, where HMOs posted an aggregate loss of $1.4 million. In contrast, California and New York HMOs reported the highest aggregate earnings at $2.4 billion and $1.4 billion, respectively.

Blue Cross Blue Shield Plans Report 63% Profit Increase

Blue Cross Blue Shield plans, as a group, produced a $5.4 billion profit, which is a $2.1 billion, or 63 percent, increase compared to the $3.3 billion profit recorded in 2002. Of the 56 Blues plans, 51, or 91.1 percent, reported positive earnings in 2003. Blues plans reporting the largest increases in profits were:

Company

Headquarters

Weiss Safety Rating

Net Profit (Loss)

2003
($Mil)

2002
($Mil)


$ Change

Health Care Svc Corp A Mut Leg Res

Chicago, Ill.

B+

624.5

245.9

378.6

Blue Cross Blue Shield of Michigan

Detroit, Mich.

B

374.4

161.3

213.1

California Physicians Service

San Francisco, Calif.

A-

314.2

142.6

171.6

Blue Cross Blue Shield of MA

Boston, Mass.

A

232.3

84.6

147.6

Blue Cross Blue Shield of NC

Chapel Hill, N.C.

B

165.4

17.8

147.6

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

Notable Upgrades and Downgrades

Of the 502 HMOs reviewed by Weiss using year-end 2003 data, 24 companies were upgraded, while 14 were downgraded. Notable upgrades include:

 
  • Group Health Cooperative (Seattle, Wash.)
  •   from B to A
     
  • MVP Health Plan Inc. (Schenectady, N.Y.)
  •   from B+ to A
     
  • United Healthcare of Florida (Maitland, Fla.)
  •   from C to B

    Notable downgrades include:

     
  • Physician Health Plan of SW Michigan (Kalamazoo, Mich.)
  •   from C- to D
     
  • Ultimed HMO of Michigan (Detroit, Mich.)
  •   from C- to D-
     
  • Universal Care (Signal Hill, Calif.)
  •   from D- to E+

    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 Ratings, Inc. reviews more than 8,000 stocks daily, including all those traded on the New York Stock Exchange, the American Stock Exchange, and Nasdaq. Weiss also issues investment ratings on more than 12,000 mutual funds, covering equity, fixed-income, and closed-end funds, and provides financial safety ratings on more than 15,000 financial institutions, including banks and insurance companies. It 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. Ratings and analyses, consumer financial and investment guides, and other products are available for purchase through www.weissratings.com or by calling 800-289-9222.

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    [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.


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