News and Commentary

While Large HMOs' Finances Improve, Small Plans Suffer

Several large MCOs, including WellPoint, Cigna, United Healthcare, and Oxford, have reported strong third-quarter earnings. Also good news: The total capital of 572 HMOs studied by Weiss Ratings increased 10 percent during the year's first quarter, compared with the same period of 1999.

However, 44 percent of HMOs reported losses, according to Weiss — a large proportion of those being plans with fewer than 100,000 members. Worse, it says, 11 plans failed to meet the National Association of Insurance Commissioners' risk-based capital guidelines.

A few large HMOs are struggling. PacifiCare tanked CEO Robert O'Leary, whose three-month stint coincided with a meltdown that saw PacifiCare shares slide from $72 in June to $10 in mid-November. PacifiCare's reliance on Medicare, as well as a physician and hospital revolt against a payment system that had until recently been strongly oriented toward capitation, exposed PacifiCare to higher medical costs. In Texas, regulators put PacifiCare's operations there under state oversight, following allegedly slow provider payment.

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