PacifiCare Health Systems Inc., the nation's largest operator of Medicare health-maintenance organizations, said Wednesday that it plans to stop offering the Secure Horizons Medicare HMO plan in some markets, affecting about 16,800 customers.
Santa Ana-based PacifiCare had until today to let the federal government's Medicare program know if it wanted to pull out of any markets. The company said it's stopping Medicare HMO operations in Madera, Mariposa and Merced counties in California, and nine counties in Ohio, Oregon and Washington. Those markets include about 1.7% of the company's 991,000 Secure Horizons members in the U.S.
The company this year stopped offering Medicare products in parts of Arizona, California, Nevada, Texas, Utah and Washington where it had some 26,000 members. PacifiCare and many other insurers exited some markets earlier this year, saying premiums from the government health program for the elderly were too low for the plans to be profitable.
"We don't like to lose members, but in light of decreased payments from the federal government to Medicare HMOs, we have been forced to make changes in certain markets," Alan Hoops, PacifiCare chairman and chief executive, said in a statement.
PacifiCare shares fell $1.06, to $70.94, in Nasdaq trading.
Last month, PacifiCare said it was considering raising co-payments that Medicare members must pay out of pocket for care. The company said Wednesday that some remaining members may be hit with higher premiums and co-payments, while others may have their benefits reduced. Co-payments may also be increased for prescription drug coverage.
PacifiCare currently insures Medicare recipients in nine states.
Industry analysts expect other health plans to scale back their participation in Medicare as a result of a provision of the 1997 balanced budget law that squeezed $22 billion from their reimbursements over five years.
About 7 million Medicare beneficiaries have signed up with HMOs as an alternative to the program's traditional fee-for-service coverage. The HMOs have attracted seniors by offering drug coverage and other benefits not covered by traditional Medicare.
Medicare pays HMOs a fixed monthly amount to care for senior citizens. The payments are adjusted in each county to account for regional differences in health costs.
HMO executives and representatives say Medicare is underpaying the industry in certain parts of the country. They are lobbying Congress and the Clinton administration to raise reimbursements. This year, more than 400,000 Medicare HMO enrollees were forced to find new coverage after dozens of plans scaled back business.
The Clinton administration, however, says HMO withdrawals from Medicare markets this year had more to do with competition than cuts in the growth of program reimbursements.