Oxford Health Plans Anticipates Further Strengthening Of Reserves During the Fourth Quarter
PR News Wire via Dow Jones
NORWALK, Conn., Dec. 9 /PRNewswire/ -- Oxford Health Plans, Inc. (Nasdaq:
OXHP) announced today that at the direction of the New York State Insurance
Department, Oxford is increasing its medical claim reserves in its New York
subsidiaries by $164 million during the 4th quarter. This reserve enhancement
is designed to protect policyholders and was required as part of the New York
Insurance Department's continuing review and examination of Oxford's financial
condition. Oxford also intends to increase the medical claim reserves of its
non-New York subsidiaries.
These adjustments to liabilities and other charges planned by the Company will
cause Oxford to have a net loss currently estimated to be approximately $120
million in the fourth quarter and to have a net loss for the year. The final
determination of the amounts of the reserve additions for the quarter will be
made based on the most recent data available when the results for the fourth
quarter and full year are released in February. Fourth quarter results will
include recognition of the gain on the sale of the Company's interest in Health
Partners, Inc.
"We are cooperating fully with the New York State Insurance Department. In
addition, we believe these steps will enhance our prospects for returning to
profitability. We are now in the process of instilling greater discipline,
hiring more seasoned management, and refining our processes to eliminate the
mistakes of our past," said Stephen F. Wiggins, Oxford's Chairman.
The Company said that higher than expected medical expense trends in its
Medicare program, which accounts for approximately 8% of Oxford's membership and
21% of total revenues, were expected to adversely affect the Company's results
for the fourth quarter and 1998. The Company is also experiencing higher
medical cost trends in its Medicaid program and the New York State mandated
individual program. Medical expense trends were affected by continued
processing in the fourth quarter of previously delayed claims and claims
previously processed in error.
"It is clear that our Medicare program in some counties where we operate needs
restructuring," said Wiggins. "We will need to modify our plan designs and
medical networks in many of the counties where we offer our Medicare program.
Federal Government payments are inadequate to sustain our existing program. In
this review, the Company will make every effort to consider carefully the impact
of any changes on our Medicare members and provide ample notice of any changes."
The Company also plans to review ways to address increasing costs in its
Medicaid business and the New York State mandated individual program, where the
Company is required to offer government designed benefits to individual
enrollees. The Company intends to file a rate increase application with the New
York State Insurance Department for its individual product and is reviewing
rates for other products.
"We believe Oxford's employer group businesses remain the foundation of our
Company with over 1.5 million members," Mr. Wiggins added. "Even after the
reserve additions, it remains profitable today. This year's membership growth
in our employer group products demonstrates the popularity of our products and
the leading independent consumer satisfaction studies give our plans high
marks."
Oxford also announced that KPMG Peat Marwick LLP had completed the audit,
requested by the New York State Insurance Department, of the September 30, 1997
financial statements of Oxford's New York subsidiaries. The audit did not
result in any changes to the Company's unaudited condensed consolidated
financial statements as of September 30, 1997 and for the three months and nine
months then ended.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, such as statements concerning the
Company's future results of operation or financial condition, future health care
costs and administrative costs, future premium rates for commercial, Medicare
and Medicaid business, operations matters, and other statements regarding
matters that are not historical facts, are forward-looking statements (as
defined in the Securities Exchange Act of 1934, as amended); and because such
statements involve risks and uncertainties, actual results may differ materially
from those expressed or implied by such forward-looking statements. Factors
that could cause actual results to differ materially include, but are not
limited to:
1. Changes in federal state regulation relating to health care and health
benefit plans.
2. Rising medical costs or higher utilization of medical services,
including higher out-of-network utilization under point-of-service
plans.
3. Competition from health benefit plan providers and competitive
pressure on pricing Oxford products.
4. High administrative costs in operating the Company's business, the
Company's ability to develop processes and systems to support its
growing operations and the cost and impact on service of changing
technologies.
5. The effect, if any, of recent events at the Company (including any
adverse publicity) on future enrollment in the Company's health
benefit plans.
6. Any changes in the Company's estimates of its medical costs and
expected cost trends as a result of information gained in the process
of continuing to reconcile delayed claims and to pay down backlogged
claims.
7. The impact of litigation (including purported class actions recently
filed against the Company and certain officers and directors),
regulatory proceedings and other governmental action (including the
current examination, investigation and review by the New York State
Insurance Department and the previously reported inquiry by the New
York State Attorney General regarding, among other matters, public
disclosures by the Company).
8. Those factors included under the caption "Business -- Cautionary
Statement Regarding Forward-Looking Statements" in the Company's 1996
Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
These and other factors could adversely affect the results of
operations or financial condition in the fourth quarter and future
periods.
/CONTACT: Stephen F. Wiggins, Chairman of Oxford Health Plans, 203-852-1442/
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