HMO Profitability surges

Source: Business Wire

Publication date: 2005-05-24





Profitability continued to surge for the nation's HMOs(1), which earned $8.9 billion during the first three quarters of 2004, representing a $2.3 billion, or 33.6 percent(2), increase over the $6.7 billion earned during the same period in 2003, according to Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

In analyzing HMO earnings, Weiss found that, after excluding Kaiser, more than half of the industry's profits were concentrated among the five companies reporting the best performance during the period. HMOs reporting the largest year-over-year increases in earnings(2) were:





Net Profit (Loss)

-------------------------

Weiss Total 3rd Qtr 3rd Qtr

Safety Assets 2004 2003 $

Company Headquarters Rating ($Bil) ($Mil) ($Mil) Change

----------------------------------------------------------------------

Highmark, Camp Hill,

Inc. Pa. B- 4.2 170.5 (21.4) 192.0



Capital

Advantage Harrisburg,

Ins Co. Pa. C- 0.5 6.5 (101.0) 107.4



Humana

Medical Plan Miramar,

Inc. Fla. B- 0.6 126.7 48.3 78.4



BlueCross

BlueShield Chattanooga,

of Tenn. Tenn. B+ 12.5 127.0 62.2 64.8



Blue Cross of Thousand

Calif. Oaks,

Calif. A 4.9 419.7 357.6 62.2

----------------------------------------------------------------------



Weiss Safety Rating: A=Excellent, B=Good, C=Fair, D=Weak, E=Very Weak,

F = Failed, U=Unrated



"Despite substantially improved performance by many insurers over the past few years, industry earnings are concentrated among relatively few companies, therefore consumers should continue to monitor the financial strength of any HMO they are considering doing business with," said Melissa Gannon, vice president of Weiss Ratings, Inc.





Notable Rating Changes





Of the 482 HMOs reviewed by Weiss using third quarter 2004 data, 65 companies were upgraded, while only 3 were downgraded. Notable upgrades include:





-- Asuris Northwest Health (Walla Walla, Wis.) from C+ to B-



-- AvMed, Inc. (Gainesville, Fla.) from C+ to B-



-- Carelink Health Plans, Inc. (Charleston, W. Vir.)from C+ to B-



-- Coventry Health Care of Louisiana (Metairie, La.)from C+ to B-



The Weiss Safety Ratings are based on an analysis of a company's risk-adjusted capital, five-year historical profitability, quality of investments, liquidity, and stability. The latter category combines a series of factors including asset growth, premium growth, strength of affiliate companies, and risk diversification.