Utah's solvent health maintenance organizations will provide coverage for Utahns left without health insurance this week when Maxicare Utah Inc. shuts its doors.
The state insurance commissioner announced Wednesday that all of the existing HMOs will immediately contact all of the Maxicare accounts with the hope of enrolling them. There will be no lapse in coverage.The Insurance Department was barraged with calls Wednesday from Utahns who Tuesday heard that Maxicare's board of directors, citing losses of $5 million in the past five years, had announced the closure of the health plan in Utah - leaving 20,000 uninsured.
Insurance Commissioner Harold C. Yancey said he hopes the petition to liquidize Maxicare will be signed Wednesday and the remaining HMOs will structure their contracts to become effective as of Aug. 17. "This means there should be no lapse of coverage as a result of Maxicare's insolvency," he said.
Groups that at the end of a two-week marketing effort have not secured coverage also will be taken care of.
Yancey said the Insurance Department then will apportion on a pro rata basis the remaining accounts to the HMOs - also with the understanding that those accounts will be retroactive to Aug. 17.
"They (HMOs) have agreed to take over a very serious problem, and frankly I salute them for the action they have taken because they have been good citizens and recognized this is the best thing for everyone concerned," the commissioner said.
Yancey said some of Maxicare's outstanding bills ultimately will end up in the liquidation process and be apportioned.
It is unknown if the department will dip into the state's insurance guarantee fund - of which HMOs are members. The intent of the fund is to cover claims of insolvent member insurance agencies that are no longer able to pay those claims.
"The responsibilities of the fund aren't as clearly spelled out as they should be and so there is some question as to exactly when that fund is triggered," Yancey said.
The announcement Tuesday of Maxicare's demise came as no surprise to the members of the State Insurance Commission, who have been keeping close watch on all of the HMOs.
Eleven HMOs are licensed in Utah, but only eight are active. Of the eight, six had losses totaling $11.7 million in 1987. IHC Health Plans Inc., IHC Care Inc., Equicor Health Plan of Utah, Physicians Health Plan of Utah, and HealthWise - like Maxicare - have lost money for at least two years.
Combined, the six companies have lost more than $26 million since 1983, according to annual reports filed with the Insurance Commission.
Only FHP and Educators Health Care made money in 1987 - $5.3 million and $61,000 respectively.
But Yancey doesn't expect any other HMOs to shut down. In most cases the HMOs have a parent "with reasonable financial resources to protect them."
Intermountain Health Care, whose HMOs are losing money, is one such "parent."
"All HMOs in start-up modes expect a period of losses. Everyone who starts an HMO realizes there are operating losses to break even," said Dr. David A. Burton, vice president of research and development. Burton and other IHC officials met Monday and Tuesday with Yancey to resolve the problems caused by Maxicare's local demise.
"At IHC we have a budgeted loss that is diminishing each year, and we anticipate we will be in a break-even position within a couple of years. That's true for each of the other HMOs in the marketplace," he said.
Forced to compete and yet keep costs down, HMOs face some rough times ahead.
According to Yancey, HMOs nationwide will continue to battle such difficult challenges as high medical costs (increasing 12 percent to 15 percent a year), increased utilization, and exotic and expensive treatment in U.S. hospitals.
"And to be very honest, it's very difficult even from an actuary point of view for them to anticipate what the premiums should be today to take care of next year's costs," he said.
No company, Yancey said, has expressed an interest in buying Maxicare Utah Inc.
"The only interest demonstrated was someone taking over the existing contracts which Maxicare held. We have been working hard in the department for the past 10 days to try and put something together," he said. "The dilemma you face in this situation is when a company loses the kind of money that Maxicare has lost in Utah, it's pretty hard to convince someone that those losses are not going to continue - that this is a good package of business to buy."
Maxicare Utah Inc. operates in Salt Lake, Utah, Davis, Weber and Summit counties. The closure, Squires said, affects only Utah and not any of the other 35 states where the HMO does business.