Five HMOs have become financially impaired since 2006, mostly because they were small health plans specializing in local Medicare and Medicaid markets, according to an analysis by A.M. Best Co.
The plans that hit financial hard times had other things in common: All five were relatively newless than 4 years oldand had modest to minimal levels of capital. Four out of the five were in Florida.
Specializing in government-sponsored programs can be lucrative, but can also mean higher member utilization of healthcare services, higher loss ratios and higher administrative costs because of U.S. government compliance rules, according to the report.
The number of HMOs deemed financially impaired companiesmeaning they had filed for bankruptcy protection; reported losses; or were subject to regulatory action by an oversight agency due to serious business operation problemshas fallen since 1998. Nearly 4% of HMOs were financially impaired in 1998, compared to a low of 0.63% in 2007. But that trend could change for the approximately 600 HMOs in the U.S.
Managed-care companies are being pressured by higher claims and expenses, as well as the current economic environment, according to the report. If operating conditions continue to deteriorate over the medium term, the impairment rate could increase.
The five HMOs listed as financially impaired were: DoctorCare of Coral Gables, Fla.; Health Plan for Community Living of Madison, Wis.; Suncoast Physicians Health Plan of Weston, Fla.; Americas Health Choice Medical Plans of Vero Beach, Fla.; and MD Medicare Choice of Tampa, Fla.
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