Weiss Ratings reported very strong earnings from HMOs in the first half of 2004. Weiss, perhaps the most insightful of the rating agencies, noted that over half of the HMOs studied were financially strong, and the industry generated $5.8 billion in profits during the first six months of 2004.
The strong results were felt even among the less-well-off HMOs, as the number of plans considered “weak” financially dropped from 40% in 1998 to 17%.
Weiss did not provide any insights into the reason for the financial improvement, but strong premium growth generated by higher rates, better risk selection and exiting of unprofitable markets, and industry consolidation were likely contributing factors.
Interestingly, the financial improvement occured at a time when health care costs were continuing to increase at rates well above those for overall inflation. Some may note the contradiction here – the companies tasked with managing health care costs were generating big profits while failing to accomplish their appointed task.
Feb
7
