Seventy-eight HMOs nationwide are "very weak" financially, and 11 do not meet capital-level guidelines suggested by the National Association of Insurance Commissioners (NAIC), according to a Weiss Ratings survey examining HMOs' financial data from the first quarter of 2000.

The NAIC has suggested thatHMOs should be legally required to maintain at least 70 cents of capital in reserve for each dollar of capital necessary to cover the HMO's risk. Weiss found that 11 of 572 HMOs surveyed failed to meet that criteria.

In addition, Weiss assigned its lowest rating, E-, to 78 "very weak" HMOs. That's not a significant increase over last year's number, says HMO analyst Donna O'Rourke; only eight HMOs were downgraded. "We based these ratings on just the first quarter's data," O'Rourke says. "Once we have more data for the year, we can get a better idea of how they are doing."

The HMO industry has seen uneven profit distribution, the Weiss survey also says. Aggregate capital improved by 10 percent in the first quarter of 2000, and industry net income was $299 million, compared with $235 million in the first quarter of 1999. Yet 44 percent of the HMOs surveyed reported losses for the quarter. Financial results were positive in every size category except HMOs with fewer than 100,000 members, which saw aggregate losses.

"Among all the industries we rate, including banks, insurers, and brokerage firms, HMOs have the largest percentage of endangered institutions," says Martin Weiss, chairman of Weiss Ratings. "What's worrisome is that these financial pressures can sometimes impinge upon the quality of care afforded to consumers, or, in a failure, potentially leave them stranded."