Over the past four years, HMOs have shown signs of solvency, stability, and strength, a turnaround from the financial crisis of the late '90s. With mergers and consolidations leading the way, there were fewer — and better run — companies, with improved underwriting discipline.

A look at annual impairment (a euphemism for failure) counts reveals a general decrease from 1998 through 2004 in the number of companies in trouble. In addition, the percentage of HMOs that failed dropped from 3.9 in 1998 to 1.0 in 2003 and just 0.4 in 2004. An impaired company is one that reports negative capital and surplus, is entering into bankruptcy proceedings, or has been the target of an action by a regulatory or oversight agency.

But A.M. Best, which evaluates insurance companies, says these happy days may not be sustainable in the near term because pressure to maintain profitability is expected to increase due to a combination of rising enrollments in less-than profitable Medicaid business and increased competition for both commercial and Medicare members. This could cause some carriers to loosen their underwriting and pricing guidelines in the future. In addition, according to the company, the profitable underwriting cycle enjoyed by HMOs so far may be flattening (see "How Many More Quarters of Profits?").

"We're at historically low trends," says Joseph Zazzera, managing senior financial analyst at A.M. Best. "It would be difficult to maintain this trend for a prolonged time."

A.M. Best says that the companies that might experience the most difficulty in the coming years could have one or more of these characteristics: They are not the largest companies; are unaffiliated with a larger group; operate in single state; lack a competitive advantage; have shaky network relationships; and/or are already experiencing poor or deteriorating financial results.

Number of impairments and impairment frequency declining

Source: HMO Impairments Hit All-Time Lows in 2003 and 2004, A.M. Best, 2005

Managed Care’s Top Ten Articles of 2016

There’s a lot more going on in health care than mergers (Aetna-Humana, Anthem-Cigna) creating huge players. Hundreds of insurers operate in 50 different states. Self-insured employers, ACA public exchanges, Medicare Advantage, and Medicaid managed care plans crowd an increasingly complex market.

Major health care players are determined to make health information exchanges (HIEs) work. The push toward value-based payment alone almost guarantees that HIEs will be tweaked, poked, prodded, and overhauled until they deliver on their promise. The goal: straight talk from and among tech systems.

They bring a different mindset. They’re willing to work in teams and focus on the sort of evidence-based medicine that can guide health care’s transformation into a system based on value. One question: How well will this new generation of data-driven MDs deal with patients?

The surge of new MS treatments have been for the relapsing-remitting form of the disease. There’s hope for sufferers of a different form of MS. By homing in on CD20-positive B cells, ocrelizumab is able to knock them out and other aberrant B cells circulating in the bloodstream.

A flood of tests have insurers ramping up prior authorization and utilization review. Information overload is a problem. As doctors struggle to keep up, health plans need to get ahead of the development of the technology in order to successfully manage genetic testing appropriately.

Having the data is one thing. Knowing how to use it is another. Applying its computational power to the data, a company called RowdMap puts providers into high-, medium-, and low-value buckets compared with peers in their markets, using specific benchmarks to show why outliers differ from the norm.
Competition among manufacturers, industry consolidation, and capitalization on me-too drugs are cranking up generic and branded drug prices. This increase has compelled PBMs, health plan sponsors, and retail pharmacies to find novel ways to turn a profit, often at the expense of the consumer.
The development of recombinant DNA and other technologies has added a new dimension to care. These medications have revolutionized the treatment of rheumatoid arthritis and many of the other 80 or so autoimmune diseases. But they can be budget busters and have a tricky side effect profile.

Shelley Slade
Vogel, Slade & Goldstein

Hub programs have emerged as a profitable new line of business in the sales and distribution side of the pharmaceutical industry that has got more than its fair share of wheeling and dealing. But they spell trouble if they spark collusion, threaten patients, or waste federal dollars.

More companies are self-insuring—and it’s not just large employers that are striking out on their own. The percentage of employers who fully self-insure increased by 44% in 1999 to 63% in 2015. Self-insurance may give employers more control over benefit packages, and stop-loss protects them against uncapped liability.