Increases in premiums and enrollment mean more profit for HMOs - report on health maintenance organizations bu InterStudy

Business & Health, Oct, 1993

More HMOs are profitable, according to a study conducted by InterStudy, an HMO research group in Excelsior, Minn. The study is based upon data collected through Jan. 1, 1993. (See related story, "Decision Resources acquires InterStudy Publications," page 10.)

The report shows that nationwide 86% of 374 reporting HMOs earned a profit in fiscal 1992. By comparison, 82% of the responding HMOs earned a profit in 1991. Only 36% of the HMOs reporting financial results to InterStudy showed a profit in 1989.

Larger and older HMOs are apparently most likely to report profitability, says the report. However, over the years, a higher proportion of small and young HMOs are showing a profit. In 1992, 78% of the HMOs with between 5,000 and 15,000 members, and 67% of HMOs between 1 and 2 years old reported profits. In 1990, these figures were 44% and 50%, respectively.

Two measures of expansion--premium increases and enrollment growth--were reported most frequently as reasons for financial success. InterStudy data from 1989 indicate that these two causes have been the primary reasons for financial success over the past five years.

The report also shows a wide variation in HMO enrollment growth performance. While over half of all HMOs grew faster than 4%, and one quarter of all HMOs declined by 4% or more, the HMOs that showed a decline in enrollment tended to be smaller plans.

HMOs in the Mid-west and West reported aggregate annual rates of enrollment growth of about 3.5%. HMOs in the Midwest especially, were more likely to report only moderate changes in enrollment, according to InterStudy's report.

As of Jan. 1, HMOs enrolled 16.1% of the U.S. population. In 19 states, HMOs enroll more than 15% of the population.

The average monthly premium for a single person reported by HMOs was $140.13. The average monthly premium for a family was reported as $377.97.