Orange County’s health maintenance organizations posted slow growth in the past year.
The big news here: Minnetonka, Minn.-based UnitedHealth Group Inc.’s $8.1 billion offer for No. 5 Cypress-based PacifiCare Health Systems Inc. The acquisition is making its way through the regulatory process.
Overall, the 10 HMOs on this week’s Business Journal list reported a 2% increase in OC membership to 1.1 million people, compared to the previous year. Total U.S. membership for the top HMOs on the list fell 2% in the past year.
OC, like most of California, is considered a mature HMO market.
During the 1980s and 1990s, there were huge membership gains when HMOs took off, but the pace of enrollment has cooled considerably as different forms of health plans emerged.
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PacifiCare’s Cypress headquarters: 7% growth in HMO enrollment |
Meanwhile, a backlash against HMOs from consumers and lawmakers took a bite of enrollment, though the sentiments have changed in the past few years.
Plans on this year’s list counted a total enrollment of 1.1 million local members. OC’s population is a little more than 3 million.
As in past years, this list has a caveat: The figures for No. 2 Blue Cross of California, No. 6 Cigna Healthcare of California and No. 7 Universal Care of California are estimates.
Without the estimates, OC membership in the remaining seven HMOs grew 3%. Most figures were as of June 30, though some plans reported enrollment for the first quarter.
Even with surging healthcare costs during the past few years, HMOs no longer are considered the sole solution to controlling employers’ health insurance costs.
There’s been moderate movement into what is called “consumer-driven healthcare,” along with other plan alternatives such as preferred provider organizations.
Consumer-driven plans give patients a healthcare spending account. Money left at the end of the year can roll over into the next year.
Some say consumer-driven plans cut healthcare spending because patients have a direct stake in how they spend their healthcare money. Critics say consumer-driven plans could leave traditional insurance with a sicker population that uses a great deal of healthcare services.
No. 1 Kaiser Permanente extended its reign as the county’s largest HMO, with 355,846 members, a 4% gain compared to last year.
Kaiser’s OC growth is a combination of gains in its current plans as well as “an appeal to a somewhat new market,” said spokeswoman Barbara Shipnuck.
“Kaiser Permanente has really tried to add in the last two years some additional products to appeal to folks who might want something a little different from our traditional comprehensive healthcare plan,” Shipnuck said. “And so for the first time, we’ve offered a deductible plan.”
The Business Journal estimated that Blue Cross has 230,000 local members. Blue Cross is a unit of WellPoint Inc., the health insurance company created by last year’s combination of WellPoint Health Networks Inc. and Indianapolis-based Anthem Inc.
Health Net of California came in at No. 3 on this year’s list, despite a 10% slide in local membership to 132,000 at the end of March.
“It’s a very competitive market,” said Brad Kieffer, a spokesman for the Woodland Hills-based managed healthcare service company. “There has been a dip, and we have initiatives to recapture and grow the business.”
The company said in a past earnings report that Health Net’s premium increases cut into enrollment.
PacifiCare posted a 7% enrollment gain to 122,876 members.
The UnitedHealth acquisition doesn’t stand to impact PacifiCare’s local operations. UnitedHealth plans to operate PacifiCare as a separate brand with most of the company’s management, including Chief Executive Howard Phanstiel, staying on.
No. 4 Blue Shield of California counted the list’s biggest percentage growth, up 21% to 128,572 members.
“We expanded our product portfolio, added more plans and choices,” said Elise Anderson, a Blue Shield spokeswoman.
During the past year, Blue Shield has added a high-deductible plan that can be used with a health savings account. A health savings account, which allows enrollees to put aside pretax dollars for certain expenses, is a type of consumer-driven healthcare.
The Business Journal estimated that Philadelphia-based Cigna had 70,000 HMO enrollees in OC. Universal Care, which is based in Signal Hill, had an estimated OC membership of 45,000.
No. 8 Aetna Health of California reported 39,595 members in OC, down 8% from the previous year.
No. 9 Scan Health Plan, a Long Beach HMO that specializes in Medicare, posted an 11% enrollment gain to 14,326 members.
The list is rounded out by No. 10 Great-West Healthcare of Englewood, Colo. Great-West reported 10,750 members, up 2% from the past year.
PPO Directory
As was the case in previous years, many of the companies listed on the Business Journal’s preferred provider organization directory declined to break out OC enrollment figures.
The plan providers that did give local numbers posted a 2% increase in enrollment in the past year.
PacifiCare showed the largest enrollment surge. It saw membership grow 82% to 26,099. The health plan provider recently introduced PPO plans as part of its effort to move beyond its traditional HMO image.
Other PPO plans that provided OC numbers included Blue Shield, which reported a 5% membership gain to 112,216.
Aetna Health of California said its local enrollment was up 6% to 87,910. Decliners included Health Net, which said its OC PPO enrollment fell 7% to 25,000.
Health analysts have said that PPOs, which give enrollees more flexibility in selecting doctors, but at a higher cost, have gained popularity at the expense of health maintenance organizations.
But the emergence of consumer-driven healthcare, coupled with fluctuations in the economy, may limit the appeal of PPOs.
PPOs were particularly popular some years ago when competition to hire workers was fierce and more employers used benefit packages as hiring incentives.
Irvine’s Private Healthcare Systems Inc. reported 169,413 members, down 2% from the previous years. Private Healthcare’s figures include HMOs,the company declined to provide a breakdown.
Beech Street Corp., which is based in Lake Forest, declined to disclose local enrollment numbers.
Earlier this month, Beech Street said it was being acquired for $165 million by Concentra Operating Corp. of Addison, Texas, in a deal that’s expected to close late this year.
Concentra said it’s buying Beech Street in order to boost its offerings in the group healthcare market. Concentra specializes in cost-containment and case management services for the group healthcare, automobile and occupational markets. It also operates a national workers’ compensation provider network.
Beech Street is expected to operate as a distinct brand after the deal, Concentra said. Bill Hale, Beech Street’s chief executive, and other members of the company’s management team are set to continue running the operation.
Beech Street, which was founded in 1951, contracts with large employers, unions, city governments and others for access to its doctors. It is not an insurance company that operates PPOs, such as Cigna or Aetna.
