After years of double-digit growth, HMO enrollment in several states has stopped growing and has even begun to fall. During the mid-1990s, HMO enrollment grew rapidly as employers, state Medicaid programs and seniors turned to HMOs in large numbers. Enrollment growth of 10-20 percent a year was common, and dozens of new HMOs were started.
We publish Minnesota Managed Care Review and annual market studies in six other states. This note is based on the analysis that we conduct in those states.
The figure below shows that in 1996, HMOs grew by 13-24 percent in these states. However, the trend had slowed so that in 1999 the rate of growth had fallen below five percent.
Figure 1 HMO Enrollment Growth Rates, 1996-1999
Furthermore, the growth rate turned negative in the first half of 2000 in three of the states that we study - Illinois, Florida and Ohio.
Several developments explain this new trend. First, there has been a relatively high number of HMO insolvencies in the past two years. Four Medicaid HMOs have become insolvent in Ohio in the last two years. Other HMOs have closed, including hospital -sponsored plans in Florida. While other HMOs some times take over the enrollees of the defunct plan, sometimes the enrollees just scatter.
Second, numerous Medicare+Choice HMOs have exited certain counties or entire states. Ih Ohio alone, the departure of Medicare+Choice plans by Humana, Aetna U.S. Healthcare and Prudential Health will affect 70,000 seniors. While many seniors will end up in other HMOs, some have grown skeptical of HMOs that don't seem to be offering the stability that seniors want from their health plans.
Third, there seems to a shift in preferences by employers and consumers away from HMOs and toward plans that offer broader provider networks with fewer restrictions. The cost difference between HMOs and PPOs has narrowed, and employers are not persuaded that HMOs are saving money for them. Minnesota HMOs had already seen a decline in insured business in 1998, as more employers shifted to self-funded plans. While the data here are squishy, some HMOs are also putting new emphasis on their PPOs and self-funded group plans, sometimes converting HMO accounts to those other plans.