PacifiCare to Halt HMO Services in Some Areas

From Bloomberg News

PacifiCare Health Systems Inc., the No. 1 operator of Medicare health-maintenance organizations, said Wednesday it will stop offering its Secure Horizons Medicare HMO plan in some markets on Jan. 1, affecting about 16,400 subscribers.

PacifiCare had until today to let the U.S. government's Medicare program know if it wanted to pull out of any markets. The company said it is stopping Medicare-HMO operations in three counties in California and nine counties in Ohio, Oregon and Washington. Those areas include about 1.7% of the company's 991,000 Secure Horizons members in the U.S.

The California counties are Merced, Mariposa and Madera.

The company this year stopped offering Medicare plans in areas of California, Arizona, Nevada, Texas, Utah and Washington where it had about 26,000 members. PacifiCare and many other insurers exited some markets in 1999, saying that premiums from the government health program for the elderly were too low.

"The cuts that PacifiCare is making are very small relative to the size of their business," said Todd Richter, a Banc of America Securities analyst with a "neutral" rating on PacifiCare. "What [health insurers] are trying to say is, right now things aren't terrible, but if you continue this payment trend, we are going to drop out of a lot of markets."

PacifiCare shares fell $1.06 to close at $71.94 on Nasdaq.

Earlier this month, PacifiCare said the company was considering raising co-payments that Medicare members must pay out-of-pocket for care.

The Santa Ana-based company said that some remaining members may be charged 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.

Other health plans also are expected by industry analysts 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.

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