Eleven HMOs Fall Below Regulatory Guidelines For Financial Stability; Capital levels for industry improve overall; Weiss Ratings gives 'very weak' ratings to 78 HMOs.Business Editors/Health & Medical Writers PALM BEACH GARDENS, Fla.--(BW HealthWire)--Oct. 30, 2000 Eleven Health Maintenance Organizations have failed to meet the guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. recently adopted by the National Association of Insurance Commissioners The National Association of Insurance Commissioners (NAIC) is an Internal Revenue Code Section 501(c)(3) non-profit organization which seeks to organize the regulatory and supervisory efforts of the various state insurance commissioners from around the United States. (NAIC NAIC See National Association of Investors Corporation (NAIC). ) for the minimum capital level needed to maintain financial stability, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a study of 572 HMOs by Weiss Ratings, Inc., the nation's leading provider of HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, ratings. Based on the reports the HMOs filed with their state commissioners, the largest companies below the capital guidelines include Bluegrass bluegrass, any species of the large and widely distributed genus Poa, chiefly range and pasture grasses of economic importance in temperate and cool regions. In general, bluegrasses are perennial with fine-leaved foliage that is bluish green in some species. Family Health, Inc. (Ky.), Harris Harris, Scotland: see Lewis and Harris. Methodist Texas Health Plan (Texas), and Health New England New England, name applied to the region comprising six states of the NE United States—Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut. The region is thought to have been so named by Capt. , Inc. (Mass.). Separately, based on its own rating criteria, Weiss gave its lowest "E" ratings to 78 HMOs it deemed "very weak" financially, including Harvard Harvard, town (1990 pop. 12,329), Worcester co., E central Mass.; inc. 1732. A Shaker house and cemetery, a Native American museum, and a Harvard observatory are there. Pilgrim Health Care Inc. (Mass.), Omnicare Health Plan (Mich.), Great Lakes Great Lakes, group of five freshwater lakes, central North America, creating a natural border between the United States and Canada and forming the largest body of freshwater in the world, with a combined surface area of c.95,000 sq mi (246,050 sq km). Health Plan Inc. (Mich.), and Alliance Health Network (Pa.). Plus Weiss assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. its "D" grade to 162 HMOs considered "weak." "Among all the industries we rate, including banks, insurers and brokerage firms, HMOs currently have the largest percentage of endangered en·dan·ger tr.v. en·dan·gered, en·dan·ger·ing, en·dan·gers 1. To expose to harm or danger; imperil. 2. To threaten with extinction. institutions," commented Martin D. Weiss, Ph.D., chairman of Weiss Ratings. "What's worrisome is that these financial pressures can sometimes impinge im·pinge v. im·pinged, im·ping·ing, im·ping·es v.intr. 1. To collide or strike: Sound waves impinge on the eardrum. 2. upon the quality of care afforded to consumers, or, in a failure, potentially leave them stranded strand 1 n. The land bordering a body of water; a beach. v. strand·ed, strand·ing, strands v.tr. 1. To drive or run ashore or aground. 2. ." The NAIC established that HMOs should maintain at least 70 cents in adjusted capital on hand for each dollar of "target capital" -- the amount the NAIC deems necessary to cover the HMO's risks. At the same time, according to the NAIC's model law, HMOs that fail to meet these guidelines should be placed under regulatory control. Currently, however, only thirteen state legislatures A state legislature may refer to a legislative branch or body of a political subdivision in a federal system. The following legislatures exist in the following political subdivisions: Overall Industry Capital Increases 10%; Net Income Rises 27% On the positive side, the total capital of the 572 HMOs actually improved by 10% to $12.9 billion in the first quarter of 2000, as compared to the year earlier period. "Any increase in capital--the company's first defense against failure--is a welcome improvement." Dr. Weiss added. Supporting the growth in capital was a 27% increase in the industry's net income to $299 million in the first quarter of 2000, compared to $235 million in the first quarter of 1999. The aggregate results in all size categories -- except HMOs with less than 100,000 members -- were in the black for the period. However, the distribution of profits in the industry was still uneven: Among the 572 HMOs reviewed in the study, 252, or 44%, reported losses for the first quarter of 2000. Ratings Distribution and Notable Upgrades/Downgrades Only one of the 527 HMOs rated by Weiss -- Health Alliance Plan of Michigan Michigan (mĭsh`ĭgən), upper midwestern state of the United States. It consists of two peninsulas thrusting into the Great Lakes and has borders with Ohio and Indiana (S), Wisconsin (W), and the Canadian province of Ontario (N,E). -- earned an "A" rating (excellent) while Partners National Health Plans of North Carolina North Carolina, state in the SE United States. It is bordered by the Atlantic Ocean (E), South Carolina and Georgia (S), Tennessee (W), and Virginia (N). Facts and Figures Area, 52,586 sq mi (136,198 sq km). Pop. , Blue Cross of California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). , and Blue Shield of California Blue Shield of California is a not-for-profit health insurance provider headquartered in San Francisco, California. An independent licensee of the Blue Cross and Blue Shield Association, Blue Shield of California is an incorporated, wholly owned subsidiary of California Physicians' each earned an A- (also excellent). The full distribution of the Weiss Safety Ratings for HMOs is as follows:
Distribution of Weiss Safety Ratings For HMOs
Number of HMOs Percent of Total Rated
-------------- ----------------------
A and A- (excellent) 4 0.8%
B+, B, B - (good) 87 16.5%
C+, C, C- (fair) 196 37.2%
D+, D, D- (weak) 162 30.7%
E+, E, E- (very weak) 78 14.8%
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Total 527 100%
The review of first quarter data resulted in 23 receiving rating
upgrades, while eight were downgraded. Notable upgrades include:
Alameda Alliance for Health (Calif.) From C+ to B-
Health Plan of San Joaquin (Calif.) From D+ to C
Americhoice of Pennsylvania (Pa.) From C+ to B-
Notable downgrades include:
Health Options Connect Inc. (Fla.) From C- to E-
Proacta Health Partners (Colo.) From C- to D+
Qualmed Plans for Health Inc. (N.M.) From C to D
The Weiss HMO ratings are based primarily on Weiss's own risk-adjusted capital formulas, developed in 1994. Weiss also analyzes a company's five-year historical profitability, liquidity, and stability. The latter category combines a series of factors including asset growth, premium growth, strength of affiliate companies, and risk diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. . In addition to HMOs, Weiss issues safety ratings on more than 16,000 financial institutions, including life and health insurers, Blue Cross Blue Shield Blue Shield A US not-for-profit health care insurer that is a reimbursement intermediary for physicians. Cf Blue Cross. plans, property and casualty insurers, banks, and brokers. Weiss also rates the risk-adjusted performance of more than 10,000 mutual funds. It is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses, and libraries. Consumers needing more information on the financial safety of a specific company may purchase a rating or analysis directly from Weiss for as little as $15 by calling 1-800-289-9222.
HMOs Failing To Meet Regulatory Capital Guidelines Proposed
by the National Association of Insurance Commissioners (NAIC)
Weiss NAIC's Risk-
Safety Based Capital(2)
Company Rating(1) (RBC) %
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Bluegrass Family Health Inc. (Ky.) E 55.10
Community Health Choice Inc. (Texas) E- 39.56
Grand Valley Health Plan Inc. (Mich.) E+ 55.46
Harris Methodist Texas Health Plan (Texas) D 52.55
Health New England Inc. (Mass.) E 66.71
Health Options Connect Inc. (Fla.) E- 46.65
Healthcare Oklahoma Inc. (Okla.) E 36.58
HUM Healthcare Systems, Inc. (N.Y.) E- 25.99
Sun Health Medisun Inc. (Ariz.) D 29.63
Wellcare of Connecticut (Conn.) E- 34.76
Yellowstone Community Health Plan (Mont.) E+ 41.62
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Notes:
1. Weiss Ratings: A = excellent, B = good, C = fair, D = weak,
E = very weak. Plus sign = upper third of the rating grade;
minus sign = lower third.
2. NAIC's Risk-Based Capital Ratio is based on year-end 1999
financial statements and includes only those companies that reported
the necessary data. Figures shown indicate the amount of adjusted
capital a company has, as a percent of the capital the NAIC deems it
should have to cover its underwriting, business, and investment risks.
Institutions with less than 70% should be taken over by state
regulators, according to the NAIC. Adjusted capital is the actual net
worth of the company plus adjustments made for possible
understatements of capital.
HMOs with Weiss Safety Rating of E-
(lower tier of "very weak" category)
Weiss
Safety
Company Rating
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Advantage Health Plan Inc (La.) E-
Alliance Health Network (Pa.) E-
Beacon Health Plans Inc (Fla.) E-
California Pacific Medical Group (Calif.) E-
Carelink Community Health Partners (Del.) E-
Community Health Care Systems Inc (Fla.) E-
Community Health Choice Inc (Texas) E-
Florida First Health Plan (Fla.) E-
Great Lakes Health Plan Inc (Mich.) E-
Harvard Pilgrim Health Care Inc (Mass.) E-
Health Options Connecticut Inc (Fla.) E-
Heartland Health Plan of Oklahoma (Okla.) E-
HUM Healthcare Systems Inc (N.Y.) E-
Integrity Health Plan of Mississippi (Miss.) E-
Memphis Managed Care Corp (Tenn.) E-
Mississippi Select Health Care LLC (Miss.) E-
North American Healthcare Inc (N.Y.) E-
Omnicare Health Plan (Mich.) E-
PrimeHealth Inc (Ala.) E-
PrimeHealth of Alabama Inc (Ala.) E-
PriorityPlus of California Inc (Calif.) E-
Wellcare of Connecticut (Conn.) E-
Wellcare of New York Inc (N.Y.) E-
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Source: Weiss Ratings, Inc., October 30, 2000
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