Big health insurer limiting growth

Monday, Nov. 13, 2000 | 11:08 a.m.

SUN STAFF AND WIRE REPORTS

PacifiCare Health Systems Inc. will limit enrollments in its Secure Horizons Medicare health plan in five states, but not Nevada, as it continues to struggle with rising costs and a lack of increased federal funding.

The company, based in Santa Ana, Calif., said Friday it will not accept certain new members in 41 counties for 2001. The freeze does not affect current or recently enrolled members, nor will it affect those who become eligible for Medicare next year. Only currently retired Medicare recipients seeking to switch to Secure Horizons from other health maintenance organization are affected, the company said.

Kayla Arnesen, Pacificare of Nevada's director of public affairs, said Nevada is expected to buck the membership freeze and will continue to enroll new members who are medicare-eligible.

"Our provider network (in Nevada) is not at capacity, which means we have the opportunity to enroll more members and provide them with healthcare services," she said.

Arnesen said Pacificare has 63,000 customers in Nevada, of whom 33,000 are Secure Horizons members. The managed care company now has 90 employees in Las Vegas, up from 80 last month.

The company will also continue to accept new members in Los Angeles, Orange, San Diego and Imperial Counties in California, where one-third of the plan's membership lives.

Counties affected by the membership freeze are in California, Texas, Washington, Oregon and Colorado.

Not affected are Arizona and Oklahoma as well as the Las Vegas market.

"Our actions today were difficult but necessary so that we can manage the business for the short and longer term," acting Chief Executive Howard Phanstiel said.

Thursday, PacifiCare reported higher than expected earnings in its third fiscal quarter. The company reported net income of $5.2 million or 15 cents per share.

Last month, the company warned it expected to break even or lose up to 10 cents a share for the third quarter. Before the warning, analysts expected PacifiCare to make $1.90 a share, according to a survey by First Call/Thomson Financial.

The results compare with the $69 million, or $1.54 cents per share, the company earned in the same period last year.

The company said its operations are being hurt by higher than expected costs in both its commercial and Medicare businesses. PacifiCare is the nation's largest Medicare HMO with nearly 1 million members. Overall, PacifiCare has about 3.7 million members. The company serves nine states, primarily on the West Coast and in the Southwest.

The company and its competitors have been lobbying Congress to restore federal Medicare reimbursements, which were cut in the 1997 balanced budget bill.

The company also announced that five top executives will exercise joint authority as an "office of the president." The officials will report to Phanstiel, who is beginning his fourth week as acting CEO. Last month, Robert W. O'Leary resigned as president and chief executive officer after just three months.