Reversal of fortune: commercial HMOs in the Medicaid market

• Published in: Health Affairs Vol. 18; no. 1; pp. 223 - 230
• Main Authors: McCue, M J, Hurley, R E, Draper, D A, Jurgensen, M
• Format: Journal Article
• Language: English
• Published: United States Health Affairs 01.01.1999; The People to People Health Foundation, Inc., Project HOPE
• Subjects: Adequacy; Administrative expenses; Beneficiaries; Financial Management - trends; Financial performance; Government programs; Health Care Sector - trends; Health Care Surveys; Health maintenance organizations; Health Maintenance Organizations - economics; Health Maintenance Organizations - statistics & numerical data; HMOs; Humans; Independent practice associations; Interviews as Topic; Investments; Licenses; Managed care; Market segments; Markets; Medicaid; Medicaid - economics; Medicaid - organization & administration; Medicaid - statistics & numerical data; Nonprofit organizations; Ownership; Participation; Profits; Ratios; United States; Volatility; Waivers
• ISSN: 0278-2715; 1544-5208
• DOI: 10.1377/hlthaff.18.1.223

Between 1992 and 1996 the number of health maintenance organizations (HMOs) entering the Medicaid market grew at an average annual rate of approximately 22 percent. Participation among all ownership segments grew, resulting in a broad distribution of beneficiaries across the HMO industry. However, recent declines in financial performance within the industry appear to be more dramatic for plans with many Medicaid members. In addition, growing concerns about rate adequacy and volatility as well as expanding administrative demands raise questions about the long-term commitment of commercial HMOs to Medicaid participation. This paper analyzes operating characteristics and financial performance of licensed commercial HMOs from 1992 through 1996, drawing on indepth interviews with health plan executives and managed care stock analysts.