Nov. 3--A financial rating company has placed West Virginia's largest HMO among the 78 weakest in the country.
Weiss Ratings Inc. gave Carelink 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 Ohio Valley, and Optimum Choice Inc. both received grades of B-.
'We are not at all concerned by the rating,' said Carelink CEO Ted 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 financial security of insurance companies, banks and securities brokers. Company literature says it accepts no funding from the industries it rates.
The Weiss Ratings scale is similar to the report card grades used at most public schools: A is excellent; B is good; C is fair (about average); 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 nation deemed financially very weak.
'Among all the industries we rate, HMOs currently have the largest percentage of endangered institutions,' said Weiss chairman Martin Weiss. 'What's worrisome is that these financial pressures can sometimes impinge on the quality of care given to consumers, or in a failure, leave them stranded.'
Although a Weiss rating carries significant credibility in the industry, Weiss does not take into account certain factors such as the mergers and acquisitions that have disrupted Carelink during the past year, Cheatham said.
'They also do not look at how far we've come,' he said. 'We've reduced our losses by 50 percent this year.'
Carelink is owned by Maryland-based Coventry Health Care.
Last summer Carelink's previous owner, cash-strapped Camcare Inc., sold Carelink for $8 million in an effort to recoup some of the $35 million it had invested in the company. Since its inception in 1994, Carelink had lost more than $41 million.
Coventry merged Carelink with another company it operated in West Virginia, 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 $21.3 million since it began in 1994.
'The idea was to consolidate staff, which we've done,' Cheatham said. 'Now we're bringing the pricing where it needs to be -- unfortunately that means we had to issue significant rate increases to many clients.'
Cheatham said 60,000 people are enrolled in Carelink. In addition, Carelink administers Health Assurance, a preferred provider organization that has about 30,000 enrollees.
Jeffrey VanGilder of the state insurance commission, said the Weiss Rating is not good, but he says the company's clients are not at risk. 'When we approved the acquisitions, we required the company to have a minimum net worth of $7.8 million. State statute requires only a $2 million net worth,' he said.
'In addition, we have an agreement with Carelink that they must be profitable by the end of 2002.'
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(c) 2000, The Charleston Gazette, W.Va. Distributed by Knight Ridder/Tribune Business News.
