Despite the biggest premium increases in nearly a decade, health maintenance organizations are struggling to make money in Illinois.
A new report indicates nine of 19 HMOs in Illinois lost money in the first half of 2001, according to Minneapolis health-care consultant Allan Baumgarten, who follows the managed-care industry in several states.
Analysts blame the losses on a drop-off in enrollees as well as rising medical and drug costs.
HMO enrollment dropped 2.9 percent in the first half of 2001, to 2.3 million enrollees, or fewer than one in five Illinois residents.Meanwhile, HMO premium revenues rose 8 percent in 2000. HMOs on average collected $142.01 per commercial enrollee in 2000, compared with $131.43 in 1999.
“HMOs have become less influential in several ways,” Baumgarten said. “With 2.5 million enrollees, you would think that the industry would be able to exert some leverage with hospitals and physicians.”
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Yet HMO enrollment has been flat or declining across the country as employers offer workers alternatives such as less restrictive preferred provider organizations, which don’t require subscribers to get referrals to specialists from primary-care physicians.
Insurers acknowledge that PPOs tend to cost more, but say employers and their workers have been willing to pay more for more choice and more flexible benefit plans.
Still, the state’s largest HMO, Blue Cross and Blue Shield of Illinois’ HMO Illinois, has been able to gain leverage and turn a sizable profit from an increase in its enrollment.
HMO Illinois, with nearly one-third of the market, earned $24.5 million in after-tax profit in the first half of 2001. By comparison, the remaining 18 HMOs lost $15 million in the first six months of this year.
HMO Illinois’ enrollment rose 2.1 percent, to 802,020, for the first six months of the year.
Meanwhile, HMO Illinois’ large rivals all lost enrollment.
“HMO Illinois has the largest network of doctors and hospitals, so with their number of enrollees, they do have leverage,” Baumgarten said. “Nobody else can get that kind of leverage.”
Other HMOs say they may be able to stage a comeback by the end of this year as workers and employers look for less costly alternatives in the face of a softening economy and rising medical-care costs.
“As the economy changes, employers are going to migrate to HMOs,” said Elena Butkus, executive director of the Illinois Association of Health Plans. “We are wrestling with a slower economy. [HMOs] are still a bargain in comparison to other plans.”
Furthermore, Butkus blamed premium increases HMOs have made on the expense of medical technology and rising drug costs.
“We also have capital and regulatory requirements which increase our costs of doing business,” Butkus said.