Michigan Assumes Control of ‘Financially Ailing’ OmniCare Health Plan, Which Serves 70,000 Medicaid Clients
Michigan insurance regulators have assumed control of OmniCare Health Plan in an attempt to return the HMO to financial solvency, the Detroit News reports. One of the largest insurers in the state, OmniCare covers 70,000 Medicaid beneficiaries and 30,000 commercial members (Webster, Detroit News, 8/1). The health plan was placed into rehabilitation by a court order yesterday. In its petition to take over the insurer, the state said that as of May 31, OmniCare has a negative net worth of $31.9 million -- a "rapid deterioration" from January, when the plan had a negative net worth of $8.2 million (Norris, Detroit Free Press, 8/1). State law requires HMOs to maintain a net worth of at least $1.5 million. The Detroit News reports that OmniCare has been under state seizure, a "lesser form of state control," since 1998 for failure to report financial obligations, pay bills on time or file annual statements, as well as for insolvency. Under the 1998 seizure, the state took over all "property, books and accounts" for the health plans. Given that the state has controlled the health plan's finances since 1998, some doctors and hospitals executives "question" why the situation deteriorated, the News reports. Don Potter, president of Southeast Michigan Health and Hospital Council said, "If the state has been overseeing OmniCare for three years, why is it in such disarray?" OmniCare President and CEO Gregory Moses, who said he was "blindsided" by the court order, added that the state was responsible for the health plan's losses because it "had the checkbook."
Options For the State
With the health plan under state rehabilitation, the state has all the authority of the organization's directors, officers and managers, effectively putting control of the HMO's operations, property and business in state hands. The News reports that patients "should experience no disruption in care" (Detroit News, 8/1). Frank Fitzgerald, commissioner of the state Office of Financial and Insurance Services, will be the health plan's rehabilitator, but said he will name a deputy rehabilitator who will control OmniCare's "day-to-day" operations, the Free Press reports. In addition, a state administrative team will run the health plan and complete "a full review" to develop a rehabilitation plan (Detroit Free Press, 8/1). HMO analyst Allan Baumgarten said that options may include selling or dissolving OmniCare, or "attempt[ing] the arduous task of repairing the current situation," perhaps with state funds (Detroit News, 8/1). The Free Press reports it is "too early" to tell what the state will do, but OFIS spokesperson Julie Smith said the state plans to "return the HMO to financial health" (Detroit Free Press, 8/1).
