Data Report

 

PacifiCare Announces Changes For Secure Horizons Medicare HMO Health Plans in 2002

-- Nation's Largest Medicare HMO Exiting 44 Counties Affecting 64,222 Members

-- Benefit Changes Planned 'Across the Board' in Many Markets

In addition, the company said it would no longer offer Secure Horizons, its popular Medicare HMO health plan, in 44 counties in six Western states. As a result, 64,222 members, or slightly more than 6% of its Medicare HMO membership, will lose access to their plans.

The exits from such counties, reductions in benefits and increases in premiums in 2002 reflect PacifiCare's ongoing effort to continue offering its M+C health plan in as many service areas as possible. Since passage of the Balanced Budget Act in 1997, the company has been challenged to maintain networks of doctors and hospitals in selected areas for the program.

"The changes we're announcing today are among the most uncomfortable decisions we have ever had to make as a company on behalf of our members," said Howard Phanstiel, president and chief executive officer of PacifiCare.

"The disparity between what Medicare really costs and what it is willing to pay is widening to unsustainable levels. As a result, we have few alternatives left other than to leave long-standing members, raise prices and in many cases significantly reduce member benefits.

"This has produced two levels of hardship," Phanstiel added. "For some, it means consumers won't have Secure Horizons M+C as their health plan because we've had to exit their area. For others where we remain, it means they will face new `hidden taxes' -- or more cost-shifting to consumers -- to cover their rising health care costs.

"Simply put, the choice in the 'Medicare-plus-Choice' program is disappearing. For those who depend on us to keep health care affordable at a time they need it most, Secure Horizons M+C and programs like ours could be gone altogether in the next few years unless Congress acts quickly."

The number of Secure Horizons M+C members affected next year are as follows: 15 California counties with 32,713 members or more than 6% of its 519,500 members statewide; 18 counties in Texas affecting 25,262 members, or about 16% of its statewide membership of 156,700; one county in Arizona (Pinal) affecting 4,108 members or less than 4% of its statewide membership of 109,700; one county in Washington state (Cowlitz) affecting 933 members or more than 1% of its 62,000 members statewide; eight Oklahoma counties affecting 804 members or less than 3% of its 32,100 members; and one county in Oregon (Columbia) affecting 402 members or more than 1% of its 28,400 members.

No exits are planned in Colorado or Nevada for 2002, which have 61,600 and 32,100 members, respectively.(a)

In the majority of areas where PacifiCare continues to offer the Secure Horizons M+C health plan, members will generally be asked to pay higher monthly premiums to offset health care inflation. Additionally, members will see higher co-payments to visit doctors, specialists or the hospital.

"When this program was stable in the past, we saw 85-plus percent of the money we received from the government go directly to doctors, hospitals and others who service our members," Phanstiel added. "This year, we have seen that number -- what we call our medical loss ratio -- climb dramatically. It is now running on average at 90-plus percent. This is clearly challenging the future viability of the program for our members and the doctors and hospitals in it."

Prescription drug coverage, a popular benefit not available in traditional Medicare, will change in many counties where offered next year. To help combat rising pharmaceutical costs and insufficient federal funding, the health plan will emphasize generic drugs versus its previous list of name-brand and generic drugs.

However, Los Angeles and San Diego counties in California, Nevada and all but one county in Colorado will continue to offer access to both lines of medications.

PacifiCare is communicating, as it is required to do each year at this time, with its 1 million Secure Horizons M+C members about next year's changes.

Members are being notified by mail with complete details in time to make health care decisions for 2002. Its customer service centers will be available for member calls Monday through Friday. Hours vary by state and members should call their local service centers, located on the back of their membership cards, for details.

Information will also be posted on the company's Web site, http://www.pacificare.com/, as well as the federal government's own Web site, http://www.medicare.gov/.

The company said it is offering a new line of Secure Horizons Medicare Supplement insurance products in all counties in seven of the eight states it presently serves. The new products will allow members to select from four standardized supplement insurance options to help cover Medicare deductibles and out-of-pocket expenses as well as maintain their doctor and hospital relationships locally.

Currently, there are more than 37,000 doctors and nearly 400 hospitals in the Secure Horizons M+C program nationally. Dedicated to making people's lives better, PacifiCare Health Systems is one of the nation's largest health care services companies.

Primary operations include managed care and other health insurance products for employer groups and Medicare beneficiaries in eight western states and Guam. Other specialty products and operations include behavioral health services, life and health insurance, dental and vision services and pharmacy benefit management. More information on PacifiCare Health Systems can be obtained at http://www.pacificare.com/.

Risk Factors Regarding Forward-Looking Statements

The statements made by Howard Phanstiel in the above news release that are not historical facts are forward-looking statements within the meaning of the Federal securities laws, and may involve a number of risks and uncertainties. Such forward-looking statements include, but are not limited to, those relating to the ability of increased Medicare member premiums and copayments to cover increasing health care costs. Important factors that could cause results to differ materially from those expected by management include, but are not limited to, loss of membership or failure to achieve expected membership growth as a result of increased premiums or benefit adjustments, failure to continue current cost control strategies or to implement planned changes, actual medical claims results differing from current estimates, inability to achieve expected efficiencies in operations or effectively control health care costs, and new regulations or laws. Additional information on factors, risks and uncertainties that could potentially affect the company's financial results may be found in documents it files with the Securities and Exchange Commission, including the company's June 30, 2001 Form 10-Q.

(a) Membership numbers are as of 6/30/01; exit numbers reflect membership impacted as of time of CMS filing.

PACIFICARE HEALTH SYSTEMS
PROPOSED 2002 MEDICARE + CHOICE MARKET EXITS AND BENEFIT CHANGES
Members Affected by Exit of 44 Counties (1)

(1) affected membership as of 9/17/01


Effect of Proposed 2002 Medicare + Choice Benefit Changes

CONTACT:  PacifiCare Health Systems Inc., Santa Ana
Ben A. Singer (public relations), 714/825-5120
or
Suzanne Shirley (investors), 714/825-5491