Is the Comeback Real — or Is It All Just an Illusion?

Financially, did health plans do better last year than in 1998 — or worse? The answer may depend on whom you talk with and the indicators you consider.

The rating company A.M. Best says for the first nine months of 1999, profitability of 9 of the 15 largest publicly traded MCOs improved over the same period in 1998. A big reason, says Best, was a drop in special charges — one-time expenses associated with mergers or restructuring.

But Weiss Ratings says that second-quarter earnings for HMOs fell to $97 million, after reaching $274 million in the first quarter of the year — "a big disappointment," says chairman Martin Weiss. Even worse, HMOs with fewer than 100,000 members lost a collective $155 million in the second quarter, after losing $51 million in the first three months of the year.

Weiss says 16 HMOs failed last year, up from nine in 1998.

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