Biggest HMOs reap strong profits

Large HMOs report solid earnings for the third quarter of 2000, and are more profitable than their smaller counterparts.

By Cheryl Jackson, amednews staff. Nov. 20, 2000.

Premium increases that outpaced the growth of medical costs helped the nation's largest HMOs achieve what Wall Street analysts considered to be strong third-quarter results.

Hartford, Conn.-based Aetna Inc., the nation's largest health insurer, reported earnings of $177.4 million, or $1.24 per share, for the quarter ending Sept. 30, a 9% decrease from the $195.3 million, or $1.29 per share, earned in the third quarter of last year.

However, revenues increased from $7.1 billion in the third quarter 1999 to $8.1 billion in the same period for this year.

Profits at UnitedHealth Group of Minnetonka, Minn., the second largest U.S. health insurer, jumped 26%. Income increased to $182 million, or $1.08 per share, from $144 million, or 81 cents a share, for the third quarter a year ago. Revenues for the quarter were up to $5.4 billion from $4.9 billion a year prior.

The third largest U.S. insurer, Cigna Corp. of Philadelphia, reported that its operating income for the quarter fell slightly, but a share buyback program boosted per-share earnings.

Cigna reported third-quarter operating income of $281 million, or $1.76 per share, compared with $286 million, or $1.47 per share, in the third quarter of 1999. Total revenues for Cigna increased 7% to $5.03 billion from $4.69 billion.

Humana Inc., based in Louisville, Ky., saw profits increase 4.5%, as the company earned $23 million, or 14 cents per share, up from $22 million, or 13 cents a share for the like quarter in 1999. Total revenues increased to $2.62 billion, a 2.3% rise from $2.56 billion a year prior.

The larger HMOs have been more profitable than their smaller counterparts, said Donna O'Rourke, a financial analyst at Weiss Ratings Inc. They have been not only increasing premiums by 10% to 15%, but they also have been lowering their coverage by instituting higher co-pays and multitiered prescription drug coverage, she said.