HMO, insurance, and bank failures on the rise
Mounting financial losses took their toll on HMOs across the country in 1999, with 16 health plans failing, says a new report by Weiss Ratings Inc.
Insurance companies and banks fared little better, according to the Weiss Financial Scorecard for 1999. Insurance company failures were up 5 percent from 1998, with 22 failures in 1999. Bank failures increased from three to eight in the same period, the report says.
HMOs, which saw nine failures in 1998, and banks are two of the U.S. economy's most vulnerable sectors, Weiss Ratings says. Most HMOs continue to lose money on their operations, says Weiss Ratings chairman Martin D. Weiss, and more than 1,350 banks and thrifts have "weak" safety ratings. "Therefore, the failures witnessed last year could be just the tip of the iceberg," he warns.
Perhaps one of the most dramatic HMO failures is Harvard Pilgrim of New England in Rhode Island. State regulators seized the HMO's assets in late October when its parent company, Harvard Pilgrim Health Care Inc. of Massachusetts, cut off funding. The Massachusetts HMO is now facing imminent failure itself, with losses totaling as much as $177 million.
But the problem is by no means isolated to the Northeast. A 1999 third-quarter financial report from the Florida Department of Insurance shows that 15 of the state's HMOs lost a combined total of more than $52.8 million. And in the Southwest, the Texas Managed Care Review shows that HMOs in that state lost $102 million in the first half of 1999.
Weiss, based in Palm Beach Gardens, Fla., is an independent ratings company that issues safety ratings on more than 16,000 financial institutions, including HMOs, life and health insurers, Blue Cross and Blue Shield plans, property and casualty insurers, banks, and securities brokers.