Layoffs by big employers slowed growth in HMO, PPO enrollees.

Overall membership among San Diego's largest health maintenance organizations continued to grow in 1991, while total membership among local preferred provider organizations declined slightly.

Total HMO enrollees increased 8 percent as of Jan. 1, compared with a count taken at the beginning of 1991. Enrollment totaled 868,154 for the top 10 HMOs ranked on this year's San Diego Business Journal list

Meanwhile, the list of PPOs shows total enrollees dropped 2.4 percent as of Jan. 1, to 964,463 members, compared with a total of 988,260 members the previous year.

Both lists are ranked by San Diego County enrollees as of Jan. 1, 1992. For the Business Journal survey, enrollees are defined as individuals enrolled in an HMO or PPO as initial subscribers or eligible enrolled dependents. While generally accepted in the industry, this definition is not always uniformly applied by HMOs and PPOs when compiling enrollee figures, say industry sources.

Typically, the number of dependents is calculated by multiplying the number of initial subscribers by a factor -- for PPOs, it is usually around 2.0, for HMOs it may be as high as 2.5. Sometimes, however, the factor is increased by the HMO or PPO, thereby boosting total enrollment figures. It's also possible that dependents may be counted twice. For example, where a husband and wife are subscribers in separate HMOs, it's possible their children are included in the total enrollee figure for both HMOs.

While HMOs and PPOs are regulated in California by the Department of Corporations, verification of an organization's enrollee count is unavailable.

An HMO is a group of physicians that provides medical care to members at fixed, prepaid rates. Members are required in non-emergency cases to use the services of these designated physicians, hospitals or other providers of medical care.

By contrast, a PPO offers members discounts if they seek treatment from independent physicians who contract with the PPO organization. Fees are charged as services are rendered.

Both types of plans are popular with employers and employees. The industry refers to the groups as managed health care programs because both offer lower costs and increased flexibility compared with traditional indemnity insurance.

Health Maintenance Organizations

On the list of area HMOs, Kaiser Permanente Medical Care Program continues to hold the top spot. With 389,000 enrollees, Kaiser has triple the enrollees as No. 2-ranked Health Net.

Still, Kaiser's growth last year slowed, with enrollees increasing by only 3 percent, said Kaiser's public affairs director, Jim McBride.

"The main factor is the state of the economy and the large number of layoffs by major employers," he said. "Employees who lose their jobs lose their health benefits."

By law, terminated employees have the option to retain health coverage at their own cost, but few can afford it, McBride said.

Kaiser is a group-model HMO, one of three main types of HMOs. A group model -- compared with networks and individual practice associations -- consists of hospitals and doctors who provide care and services exclusively for HMO recipients. Kaiser is unique among group-type HMOs in that it owns and operates medical offices and hospitals instead of contracting for those services.

That arrangement's advantage, said McBride, is that Kaiser physicians share equal footing with management when it comes to making business decisions for the organization.

"Quality-of-care considerations are brought into the discussion by doctors who have equal responsibility and authority as managers in our program," he said.

Despite a weak economy, Kaiser is moving forward in San Diego with an aggressive expansion program it started in 1989.

"It signals our expectations that we will continue to grow despite modest gains we might have in 1992," said McBride.

New medical offices will open in Vista later this year and in El Cajon sometime in 1993, he said. Kaiser is buying land in Chula Vista's EastLake area for a hospital and medical office complex. And it has begun a site search in San Marcos to build another hospital complex.

Eight of the 10 HMOs on this year's list posted an increase in enrollees over last year's numbers.

No. 10-ranked Community Health Group, San Diego County's only locally based HMO, saw the biggest percentage increase. Community's enrollees increased 80 percent to 17,889, compared with 1991's total of 9,942.

All of Community's enrollees are Medi-Cal beneficiaries. Instead of receiving payment from an employer group, the group contracts with the California Department of Health Services.

"Managed care for Medi-Cal beneficiaries is a win-win-win situation for patients, payers and providers," said Joseph Garcia, Community's director of marketing.

Under this program, Garcia said, Medi-Cal patients are ensured access to care, providers receive prompt payment from a locally operated plan, and costs are more easily managed and contained -- a benefit for taxpayers who ultimately foot the bill.

Community is an example of a network model HMO. Networks contract with two or more independent group practices to provide members health services.

The third type of HMO, independent practice associations, or IPAs, are the most common. Care through an IPA comes from a network of solo primary-care physicians and specialists at different locations.

Two organizations that dropped enrollment last year are No. 5-ranked Aetna Health Plans of San Diego Inc. and No. 8-ranked Cigna Healthplan of San Diego. Aetna lost 11 percent of its enrollees last year, while Cigna dropped 23 percent.

Preferred Provider Organizations

Three of the top 10 PPOs ranked this year posted enrollee declines compared with the previous year. Overall, the PPO enrollees dropped nearly 3 percent.

Looking back, total local PPO enrollment had a significant decline in 1989, when enrollment dropped about 19 percent. Between 1989 and 1991, overall enrollment climbed until last year's drop.

One reason for the decline in 1988 was a general conversion of the local market from PPOs to HMOs, said Dr. David Gollaher, associate professor of public health at San Diego State University's Graduate School of Public Health.

Another reason for the decline in 1989, said Gollaher, is that 1989 was the year Greater San Diego Health Plan went out of business and most of its PPO members eventually switched to an HMO at another company. Greater San Diego had 55,000 PPO members as of Jan. 1, 1989, according to the 1989 list of area PPOs published by the Business Journal.

Of the PPOs on this year's list, those with fewer enrollees compared with a year ago include: Foundation for Medical Care, with 360,000 members, lost 4 percent; No. 2-ranked Community Care Network's enrollees declined nearly 3 percent to 127,500; Blue Shield, No. 5 on the list, declined 3.4 percent to 70,000 enrollees.

Foundation for Medical Care lost 15,000 members last year primarily because of the economy, said Bill Andrews, director of marketing.

About 10,000 of the members Foundation lost had health coverage through Seattle-based Great Republic Insurance Co. until July when the company was taken over by the state Department of Insurance. As of September, Great Republic's contract with Foundation was terminated, said Andrews.

Another 5,000 local members lost their health coverage last year primarily through layoffs at companies insured by one of Foundation's major carrier clients.

"It was a bad year economically. Cut-backs and layoffs mean people lose their coverage, and we haven't made those numbers up yet," said Andrews.

One of Foundation's strengths is that a majority of San Diego's physicians and hospitals are signed up as providers for the PPO. About 2,750 of the 4,000 physicians in the county are on the plan's roster, as well as 29 of the 30 local hospitals, Andrews said.

Two plans provided numbers for this year's list that declined to participate in last year's ranking: No. 7 Aetna Health Plans and No. 10 Connecticut General Life Insurance Co.