A.M. Best Expands Rating Coverage For Health Maintenance Organizations

Business Wire, August 23, 1999

OLDWICK, N.J.--(BW HEALTHWIRE)--Aug. 23, 1999--

A.M. Best Co. today announced the expansion of its rating coverage on health maintenance organizations through the introduction of Best's Qualified Ratings. Best's Qualified Ratings (denoted with a "q" subscript) are based on a comprehensive review of the statutory filings of the HMO plans and will be assigned to those HMOs that do not subscribe to A.M. Best's interactive rating process.

A.M. Best began assigning interactive Best's Ratings to HMOs in 1995. Best's Ratings currently are assigned to more than 150 of the approximately 700 HMOs operating in the United States through its interactive rating process. The rapid growth and changes occurring in the health-care market, combined with increasing national attention to the financial strength and stability of health-care organizations, have resulted in a growing number of requests by consultants, brokers, risk managers, employee-benefit managers and the public that A.M. Best increase its rating coverage of HMOs.

In response to this growing interest and concern, A.M. Best has introduced Best's Qualified Ratings, which are based on a comprehensive review of the statutory filings of the HMO plans. At this time, Best's Qualified Ratings are being confined of the HMO industry and will be assigned to those HMOs that do not subscribe to its interactive rating process. The procedure used to assign a Best's Qualified Rating is based on the quantitative analysis of the three key operating areas that comprise A.M. Best's traditional rating methodology: financial strength, operating performance and market profile. The procedure excludes, however, the qualitative portion of the interactive rating process, which includes the submission of supplemental financial information and interaction with management. Best's Qualified Ratings are intended to assess the varying degrees of financial strength of HMOs, ranging from Secure to Vulnerable, and to identify plans that are potentially more susceptible to financial instability.

Financial results for the HMO industry have been poor the past two years. This has been due largely to competitive pricing, rising medical costs and weak industry capitalization.

Although most HMOs have implemented increased medical management and higher premium pricing, A.M. Best believes financial instability will continue with some HMOs. In addition, some HMOs may not be able to survive and are candidates for acquisitions and, in some cases, voluntary liquidation.

The first group of HMOs assigned Best's Qualified Ratings are the operating units of Coventry Health Care Inc., Henry Ford Health System, IHC Inc. and Mid Atlantic Medical Services Inc. The companies assigned "q" ratings are listed below. -0-

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  Company                             Group                   Rating
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Group Health Plan, Inc. (MO)     Coventry Health Care Inc.    B-q
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HealthAmerica Pennsylvania, Inc. Coventry Health Care Inc.    Bq
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HealthCare USA of Missouri       Coventry Health Care Inc.    B q
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Principal Health Care of GA Inc  Coventry Health Care Inc.    Bq
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Principal Health Care of IA Inc  Coventry Health Care Inc.    B  q
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Principal Health Care of IN Inc  Coventry Health Care Inc.    Bq
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Principal Health Care of LA Inc  Coventry Health Care Inc.    Bq
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Principal Health Care of NE Inc  Coventry Health Care Inc.    Bq
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Principal Health of Carolinas    Coventry Health Care Inc.    Bq
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Principal Health of St. Louis    Coventry Health Care Inc.    B q
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Southern Health Services, Inc.   Coventry Health Care Inc.    Bq
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Health Alliance Plan of MI       Henry Ford Health System     A-q
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IHC Care, Inc.                   IHC Inc.                     C  q
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IHC Group                        IHC Inc.                     B q
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IHC Health Plans, Inc.           IHC Inc.                     B q

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M.D. Individual Practice Assoc.  Mid Atlantic Medical
                                 Services Inc.                B  q
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Optimum Choice of the Carolinas  Mid Atlantic Medical
                                 Services Inc.                C  q
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Optimum Choice, Inc.             Mid Atlantic Medical
                                 Services Inc.                B  q
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