HMO enrollment grows, national study finds
Growth, profitability vary by market
The number of geographic markets with relatively high managed care penetration is growing, a new study from Minneapolis-based InterStudy Publications finds. However, HMOs had have limited success in reducing their medical expense ratios, and per-member-per-month (PMPM) medical costs are continuing to increase, the study finds.
As of January 1998, there were 149 markets with managed care penetration rates of 25% or greater, according to InterStudy’s report, Regional Market Analysis 8.2. This represents a substantial increase from the comparable 1996 period, when only 71 metro areas had managed care penetration above 25%.
The data show managed care penetration building in Pittsburgh (see chart, below), one of the most heavily penetrated large markets, with a penetration rate of 53.5%. Pittsburgh’s penetration rate is well above the 75th percentile compared to other large markets (cities with a population of 1 million or more).
The three most highly penetrated large markets measured in the InterStudy report are Rochester, NY (71.4%), Sacramento, CA (66.1%), and Buffalo-Niagara Falls, NY (64.8%), the study finds. The three most highly penetrated medium markets are Santa Rosa, CA (74.3%), Boulder-Longmont, CO (71.5%), and Worcester, MA (70%). The three most highly penetrated small markets are Burlington, VT (79.7%), Springfield, IL (72.8%), and Pittsfield, MA (63.2%).
Total PMPM revenue received by health plans grew slightly for year-end 1997 compared to year-end 1996, the report says.
Another InterStudy report, The InterStudy Competitive Edge, found that medical expense ratios among health plans across the country continue to average around 89% to 90%, while average medical expenses for all metro areas totaled $124 per member per month. Why are these expenses still so high? "Managed care has been around a while [in many markets], and a lot of the fat has been cut out," says Tammy Lauer, research manager for InterStudy’s Competitive Edge series. "Plans got to a place where they couldn’t cut anymore. Even though premiums have finally been raised in the last year, this is basically making up for years of losses."
For a copy of the InterStudy reports, contact the company at (800) 844-3351.