HMOs Make a Return to Profitability - health maintenance organizations - Brief Article - Statistical Data Included

HR Magazine, Oct, 2001 by Bill Leonard

The health maintenance organization (HMO) industry in the United States returned to profitability last year by earning nearly $1 billion following three years of losses, according to a recent study of 492 HMOs conducted by Weiss Ratings Inc.

The researchers for Weiss attribute the return to profitability to rising premium rates and to selling or shutting down unprofitable divisions and health care facilities by HMO companies. As many employers have noted, many health insurance providers have increased their premiums to keep pace with the higher costs of health care. According to the Weiss data, most health care plans increased their premiums from 8 percent to 12 percent annually over the past two years. Many smaller HMOs (fewer than 100,000 members) have increased their rates between 12 percent and 18 percent each of those years, the statistics show.

Larger HMOs (more than 500,000 members) led the industry back to profitability last year, according to Weiss. Of the 31 largest HMOs, only seven lost money, and large HMOs earned more than $1.2 billion during 2000. Of the 318 HMOs with fewer than 100,000 members. 165 lost money, the study revealed.

Bill Leonard is senior writer for HR Magazine.