News in brief - Oct. 22/29, 2001

California dissolves two HMOs - Anthem expands stock offering - Oklahoma HMO goes kaput - Florida HMOs move toward merger - Hawaii insurer cuts rates temporarily

California dissolves two HMOs

HMOs Maxicare and Tower Health in California are in their final stages of life, having been seized by the state earlier this year for financial insolvency. According to newspaper reports, the HMOs will be shuttered by year's end.

Maxicare is selling its Medi-Cal business with its 91,000 policyholders to two HMOs, but no buyers have emerged for its commercial business, which will leave 154,000 people to be assigned to other HMOs.

Maxicare Health Plans also operates in Indiana, where it had 99,000 members. It was seized by the state of Indiana in May for financial insolvency and is being sued by the state for fraudulent concealment and breach of contract.

California health officials took control of the physician-owned HMO, Tower Health, on Sept. 14, and its 111,000 enrollees are being assigned to other insurance carriers, as well.

Anthem expands stock offering

The threat of recession has Anthem expanding its proposed $3 billion stock offering by $230 million. Anthem said it will be offering interest-bearing equity security units, which require holders to convert the units into Anthem stock in three years, in addition to the original stock in its initial public offering.

The Indianapolis-based health insurer owns Blue Cross and Blue Shield markets in eight states and has 7.5 million members. It plans to go public before year's end if the approval process to change its nonprofit status moves forward.

Anthem said the broader offering was being made "in view of the current unpredictable and volatile market conditions." Anthem also narrowed its estimate for its IPO to $33 to $37 per share from $25 to $45 per share.

Oklahoma HMO goes kaput

HealthCare Oklahoma said it will close its doors March 31, 2002, leaving 55,000 members to find coverage elsewhere. The HMO has been operating at a loss since it started in 1995 and dropped below the state's minimum net worth requirement late in 2000. Of Oklahoma's 10 HMOs, only two, Prime Advantage and PacifiCare of Oklahoma, ended 2000 with a profit.

Florida HMOs move toward merger

HIP Health Plan of Florida, Beacon Health Plan and Foundation Health will change their names to Vista Healthplan, as their owner takes steps toward combining the plans' operations.

The three HMOs have a total of 65,000 policyholders in Palm Beach County. Entrepreneur Steven Scott, MD, owns the plans along with Healthplan Southeast in Tallahassee, which is also slated to become a Vista Healthplan. The Scott-owned plans have a total enrollment of 480,000 members. After the merger, Vista Healthplan will become the third largest health care insurer in Palm Beach County.

Hawaii insurer cuts rates temporarily

Hawaii Medical Service Assn., the state's largest health insurer, said it will temporarily slash health insurance rates in half for members who lost their insurance due to the economic pullback following the Sept. 11 terrorist attacks.

Employers with HMSA contracts will get a 5% rebate of their annual dues. HMSA estimates this will save employers $35 million.

HMSA said it will cost $50 million to fund the program.

HMSA will subsidize 50% of COBRA premiums for three months for enrolled employees who've lost their jobs and thus their employer contribution to their health insurance premiums.