By Martha Leonard
mleonard@wvgazette.com
A financial rating company has placed West Virginia's largest HMOamong the 78 weakest in the country. Weiss Ratings Inc. gaveCarelink Health Plans Inc. an E+ for the first quarter of 2000,placing it in the lowest of five categories of financial stability.
West Virginia's two other HMOs, Health Plan of the Upper OhioValley, and Optimum Choice Inc. both received grades of B-.
'We are not at all concerned by the rating,' said Carelink CEOTed Cheatham. 'The rating reflects only the first quarter of 2000.We're doing considerably better now.'
Weiss is a national independent company that rates the financialsecurity of insurance companies, banks and securities brokers.Company literature says it accepts no funding from the industries itrates.
The Weiss Ratings scale is similar to the report card grades usedat most public schools: A is excellent; B is good; C is fair (aboutaverage); D is weak; and E is very weak, said a Weiss spokeswoman.Ratings come out on a quarterly basis.
Carelink's 'E' rating was shared with 77 other HMOs in the nationdeemed financially very weak.
'Among all the industries we rate, HMOs currently have thelargest percentage of endangered institutions,' said Weiss chairmanMartin Weiss. 'What's worrisome is that these financial pressurescan sometimes impinge on the quality of care given to consumers, orin a failure, leave them stranded.'
Although a Weiss rating carries significant credibility in theindustry, Weiss does not take into account certain factors such asthe mergers and acquisitions that have disrupted Carelink during thepast year, Cheatham said.
'They also do not look at how far we've come,' he said. 'We'vereduced our losses by 50 percent this year.'
Carelink is owned by Maryland-based Coventry Health Care.
Last summer Carelink's previous owner, cash-strapped CamcareInc., sold Carelink for $8 million in an effort to recoup some ofthe $35 million it had invested in the company. Since its inceptionin 1994, Carelink had lost more than $41 million.
Coventry merged Carelink with another company it operated in WestVirginia, hoping to consolidate some administrative services,Cheatham said.
Early in 2000, Coventry acquired yet another HMO - Prime One.Prime One also was on shaky financial ground, having lost $21.3million since it began in 1994.
'The idea was to consolidate staff, which we've done,' Cheathamsaid. 'Now we're bringing the pricing where it needs to be -unfortunately that means we had to issue significant rate increasesto many clients.'
Cheatham said 60,000 people are enrolled in Carelink. Inaddition, Carelink administers Health Assurance, a preferredprovider organization that has about 30,000 enrollees.
Jeffrey VanGilder of the state insurance commission, said theWeiss Rating is not good, but he says the company's clients are notat risk. 'When we approved the acquisitions, we required the companyto have a minimum net worth of $7.8 million. State statute requiresonly a $2 million net worth,' he said.
'In addition, we have an agreement with Carelink that they mustbe profitable by the end of 2002.'
To contact staff writer Martha Leonard, use e-mail or call 348-1254.
