Health Plans of America, a financially troubled HMO based in Maitland, Fla., might be less than two weeks away from liquidation by state regulators.
The 2-year-old, for-profit health plan has until Nov. 4 to come up with roughly $2.5 million to reach mandatory solvency levels, according to officials at the Florida Department of Insurance.
HPA's Miami-based holding company, HP America, this month added $1 million to the health plan's reserves, but that wasn't nearly enough to salvage the situation.
HPA lost about $2.3 million on revenues of $20.6 million in the fiscal year ended June 30, according to audited figures supplied by the insurance department. Company officials said the HMO has posted a $119,000 profit through June.
The officials said the plan's problems stem from the young company's inability over the past two years to gain approval for premium increases. Competitors were able to do so, and HPA was left with premium rates that were among the lowest in the state, they said.
The company is now under "administrative supervision" by the state insurance department, permitting regulators to become involved in its day-to-day business operations, said insurance department Deputy Receiver Eric Marshall, who is monitoring the company's activities.
That designation is different from receivership, but Marshall said it is likely the company will be placed into a receivership unless it can raise sufficient funds from outside investors before the Nov. 4 deadline.
No extensions of that deadline are possible under Florida law.
If the insurance department is appointed as the company's receiver, it would try to liquidate the company's assets and possibly use funds from the state's HMO Consumer Assistance Plan to provide interim coverage until enrollees are able to sign on with other insurers.
That fund provides up to $300,000 for six months, according to regulators.
In the meantime, HPA is seeking emergency cash infusions from banks, venture capital firms and other investors.
"I think we'll know by (late October)," said Robert Flanagan, who serves as chief executive officer of both the parent company and its Health Plans of America HMO unit.
The company also owns some group-practice clinics in the state, he said. HPA's only chance to survive is to gain a quick cash infusion from outside investors or to sell its book of business to another health plan, Flanagan said. But he acknowledged that the privately held company's original investors didn't want to contribute any more capital.
As of June 30, HPA filed audited financial documents with the department showing that it needed a cash infusion of $3.5 million to meet solvency standards, Marshall said.
Even after the $1 million infusion from its parent company, "it's probably a larger hole" now, according to Marshall, who said HPA has informed its brokers and providers of its financial difficulties.
In late September, HPA and the Orlando (Fla.) Regional Health System announced plans to end their contractual relationship effective Nov. 23, following a dispute over approximately $500,000 in unpaid hospital bills.
HPA's first enrollees signed on in January 1997, and the health plan grew from roughly 2,200 enrollees in mid-1997 to about 32,000 in the middle of this year, Flanagan said.