HMOs Earn $10.2 Billion in 2003, Nearly Doubling Profits, According to Weiss Ratings; Blue Cross Blue Shield Plans Report 63% Jump in Earnings

JUPITER, Fla.--(BUSINESS WIRE)--Aug. 30, 2004--The nation's HMOs(1) nearly doubled their profits during 2003, earning $10.2 billion, an 86 percent increase over the $5.5 billion reported in 2002, according to Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

In analyzing HMOs' earnings, Weiss found that one company, Kaiser Foundation Health Plan, reported a $1.1 billion increase in net profit, which represents one-fifth of the industry's net profit improvement. The increase is a result of regulatory changes that required the company to consolidate its year-end financial statements for all entities owned, including hospitals and provider groups. HMOs reporting the largest year-over-year increases in earnings were:

                                                  Net Profit (Loss)
                                       Weiss   -----------------------
                                       Safety  2003    2002       $
Company                Headquarters    Rating ($Mil)  ($Mil)   Change
----------------------------------------------------------------------
Kaiser Foundation
 Health Plan Inc       Oakland, Calif.   B-    995.5  -117.5  1,113.1
Blue Cross Blue Shield
 of Michigan           Detroit, Mich.    B     374.4   161.3    213.1
Group Health
 Cooperative           Seattle, Wash.    A     187.8    -6.9    194.7
California Physicians  San Francisco,
 Service                Calif.           A-    314.2   142.6    171.6
Aetna Health Inc (a
 Florida Corp)         Tampa, Fla.       C     129.8   -40.2    170.0
----------------------------------------------------------------------
Weiss Safety Rating:  A=Excellent, B=Good, C=Fair, D=Weak, 
E=Very Weak, F = Failed, U=Unrated

“We may soon see the next wave of consumer backlash forcing HMOs to evolve their cost structures.”

"The industry's soaring profits continue to irk both consumers and businesses who are shouldering skyrocketing healthcare costs without any perceived improvement in benefits," commented Melissa Gannon, vice president of Weiss Ratings, Inc. "We may soon see the next wave of consumer backlash forcing HMOs to evolve their cost structures."

Blue Cross Blue Shield Plans Report 63% Profit Increase

Blue Cross Blue Shield plans, as a group, produced a $5.4 billion profit, which is a $2.1 billion, or 63 percent, increase compared to the $3.3 billion profit recorded in 2002. Of the 56 Blues plans, 51, or 91.1 percent, reported positive earnings in 2003. Blues plans reporting the largest increases in profits were:

                                                  Net Profit (Loss)
                                        Weiss   ----------------------
                                        Safety   2003   2002      $
Company                 Headquarters    Rating  ($Mil) ($Mil)  Change
----------------------------------------------------------------------
Health Care Svc Corp A
 Mut Leg Res            Chicago, Ill.     B+    624.5  245.9    378.6
Blue Cross Blue Shield
 of Michigan            Detroit, Mich.    B     374.4  161.3    213.1
California Physicians   San Francisco,
 Service                 Calif.           A-    314.2  142.6    171.6
Blue Cross Blue Shield
 of MA                  Boston, Mass.     A     232.3   84.6    147.6
Blue Cross Blue Shield  Chapel Hill,
 of NC                   N.C.             B     165.4   17.8    147.6
----------------------------------------------------------------------
Weiss Safety Rating:  A=Excellent, B=Good, C=Fair, D=Weak, 
E=Very Weak, F = Failed U=Unrated

Regionally, Oregon HMOs trailed the rest of the nation, reporting an aggregate loss of $68.5 million, followed by Utah, where HMOs posted an aggregate loss of $11.2 million. In contrast, California and Illinois HMOs reported the highest aggregate earnings at $773.6 million and $624.6 million, respectively.

Notable Upgrades and Downgrades

Of the 502 HMOs reviewed by Weiss using year-end 2003 data, 24 companies were upgraded, while 14 were downgraded. Notable upgrades include:

    --  Group Health Cooperative (Seattle, Wash.)        from B to A

    --  MVP Health Plan Inc. (Schenectady, N.Y.)         from B+ to A

    --  United Healthcare of Florida (Maitland, Fla.)    from C to B

    Notable downgrades include:

    --  Physician Health Plan of SW Michigan (Kalamazoo, 
        Mich.)                                           from C- to D

    --  Ultimed HMO of Michigan (Detroit, Mich.)         from C- to D-

    --  Universal Care (Signal Hill, Calif.)             from D- to E+

The Weiss Safety Ratings are based on an analysis of a company's risk-adjusted capital, five-year historical profitability, quality of investments, liquidity, and stability. The latter category combines a series of factors including asset growth, premium growth, strength of affiliate companies, and risk diversification.

Weiss Ratings, Inc. reviews more than 8,000 stocks daily, including all those traded on the New York Stock Exchange, the American Stock Exchange, and Nasdaq. Weiss also issues investment ratings on more than 12,000 mutual funds, covering equity, fixed-income, and closed-end funds, and provides financial safety ratings on more than 15,000 financial institutions, including banks and insurance companies. It is the only major rating agency that receives no direct or indirect compensation from the companies it rates for issuing its ratings. Revenues are derived strictly from sales of its products to consumers, institutions, businesses, libraries, and governmental agencies. Ratings and analyses, consumer financial and investment guides, and other products are available for purchase through www.weissratings.com or by calling 800-289-9222.

Note to Editors: National and state listings of strongest and weakest HMOs are available.

(1) Analysis based on insurers that filed a NAIC Health Statement or a California Health Care Service Plan statement. Other insurers offer health insurance, but are not included in this analysis. Please refer to Weiss Ratings' Life & Health releases for additional health insurance studies and/or companies at www.WeissRatings.com.