Cigna plans Medicare HMO pullout

Company says reimbursements too low for profit

8,100 affected in Maryland

104,000 customers nationwide to lose service in December

Health care

June 03, 2000|By Rona Kobell | Rona Kobell,SUN STAFF

In a move that will affect 8,100 Maryland senior citizens, CIGNA HealthCare announced yesterday that it is pulling out of the Medicare HMO business in the mid-Atlantic region and 12 other markets.

The Connecticut-based health maintenance organization said it could not remain competitive because government reimbursement rates were not keeping pace with rising medical costs.

Federal laws require that Medicare HMOs notify the Health Care Financing Administration, which oversees Medicare, by July 31 if they plan to leave. CIGNA's plans officially end Dec. 31.

Nationwide, CIGNA's pullout affects 104,000 customers in Maryland; Atlanta; Connecticut; Delaware; Houston; Los Angeles; New Jersey; New York City; Tennessee; Richmond, Va.; Tampa and Orlando, Fla.; and Tucson, Ariz.

In this region, CIGNA has 9,400 customers - 8,100 in Maryland; 300 in Washington; and 1,000 in Northern Virginia.

When CIGNA leaves, its members can join other Medicare HMOs - although it is not yet clear which will remain in the market - or return to traditional Medicare coverage.

CIGNA will continue to serve its 50,000 customers in New Mexico and Phoenix, said Mark Di Giorgio, the company's director of corporate relations.

CIGNA entered the Medicare HMO business in January 1999. With the Balanced Budget Act of 1997, Congress had included Medicare+Choice, a government initiative encouraging more private plans to offer Medicare coverage.

Of the more than 39 million seniors eligible for Medicare, 6.6 million are now enrolled in HMOs. The HMOs were an attractive option because they could provide benefits that Medicare didn't offer, such as prescription plans, at a cheaper rate than Medigap supplemental insurance.

By the time CIGNA came in, several other insurers were already jumping out of the Medicare business in key markets. Among them were CareFirst BlueCross BlueShield, Humana and PacifiCare Health Systems.

HMO providers have complained for several years that government reimbursements were not keeping pace with inflation from year to year. That was the key problem for CIGNA, Di Giorgio said.

The government was increasing its reimbursement payouts by 2 percent a year, but the actual medical costs were increasing by 7 percent or 8 percent, Di Giorgio said.

"We could not continue to achieve the goal of offering quality care at an attractive price to our customers," he said.

CIGNA lost money in Maryland and other markets, Di Giorgio said. In an effort to keep the plans afloat, the company cut back on prescription benefits and raised some costs. But, he added, "it didn't seem judicious to whittle benefits and increase the prices."

In response to CIGNA's announcement, the Health Care Financing Administration issued a statement touting President Clinton's recent prescription drug proposal and chalking up the HMO pullouts to bottom-line concerns.

"While private-sector Medicare HMOs are paid more than enough to provide the basic Medicare benefits, the payment formula set up by law doesn't always pay enough for the extra benefits they use to entice beneficiaries and make enough profit," the statement read.

But Richard Coorsh, spokesman for the Health Insurance Association of America, said it's not about making profits. He says medical cost inflation will soon reach 10 percent or 11 percent a year, and with the government increases holding at 2 percent, Medicare HMOs will lose money.

"We are convinced that woefully inadequate government funding, combined with the crushing costs of government red tape and regulations, is making it increasingly difficult for the HMOs to provide the quality coverage on which seniors have come to depend," Coorsh said.

As the exodus continues, Coorsh said, seniors will have fewer plans from which to choose, will pay more and will receive fewer benefits - just what Medicare+Choice wanted to avoid. Coorsh expects more of his 294 members to drop their Medicare HMOs before the deadline.

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