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5.5.2003: Meldung: Oxford Health Plans Reports First Quarter Results
Oxford Health Plans, Inc. (NYSE: OHP - News) announced today net income of $72.9 million, or $0.86 per share, for the quarter ended March 31, 2003, compared to $71.4 million, or $0.78 per share, for the prior year quarter. The 2003 results include a pretax charge of $45 million, or $0.32 per share after tax, for the final settlement of the 1997 securities class action litigation. First quarter run rate earnings were $1.13 per share in 2003 compared to $0.75 per share in 2002. See Exhibit 1 of this release for a reconciliation of earnings reported under generally accepted accounting principles to run rate earnings for the first quarter of 2003 compared to 2002. Oxford"s CEO and President, Charles G. Berg, commented on the results, "We are pleased with our favorable first quarter financial results. We are focused on our long-term strategy, which is dedicated to delivering innovative products, healthcare programs and services to our customers and members."
Business Highlights
Membership: Fully insured commercial membership, excluding reductions in MedSpan membership, increased approximately 14,300 members during the first quarter over year-end 2002 membership. MedSpan membership declined by approximately 13,000 members during the quarter as the Company completed the annual renewal cycle for this business acquired in early 2002. Total fully insured commercial membership ended the quarter at 1.481 million members compared to 1.479 million members at the end of 2002 and 1.442 million members in the first quarter of 2002. Medicare membership increased during the first quarter by over 600 members, ending the period at 70,700 members. See Exhibit 5 for historical membership statistics.
Premium Revenue: Premium revenue increased 14.5% in the first quarter, to $1.31 billion, compared to the first quarter of 2002. Commercial premiums increased 15.4% to $1.15 billion compared to $1.00 billion in the first quarter of 2002. This premium growth was due to a 4.4% increase in commercial member months and a net premium yield increase of approximately 10.5%. Medicare premiums, which represented 11.9% of total premiums, increased 8.6% to $155.4 million compared to $143.0 million in the first quarter of 2002. See Exhibit 4 for premium PMPM statistics and analysis.
Investment and Other Income, net: Investment and other income, net, was $31.6 million compared to $21.2 million in the first quarter of 2002. Realized gains were $13.7 million compared to $2.4 million in the first quarter of 2002. The realized gains in the first quarter of 2003 were primarily the result of the Company taking advantage of market value increases in its investments in U.S. Treasuries. The net pre-tax yield on the Company"s portfolio of investments was approximately 3.6% during the first quarter of 2003 compared to approximately 4.7% during the first quarter of 2002.
Health Care Services Expense: Health care services expense was $1.034 billion compared to $914.4 million in the first quarter of 2002. The Company"s medical loss ratio improved in the first quarter of 2003 by 100 basis points to 78.9% compared to 79.9% in the first quarter of 2002 and was 130 basis points below the fourth quarter of 2002. During the first quarter of 2003, net per member per month commercial medical costs increased approximately 8.4% compared to the first quarter of 2002. See Exhibit 4 for medical PMPM statistics and analysis.
Net favorable development of prior period medical reserves was $7.1 million compared to approximately $5.1 million in the first quarter of 2002. See Exhibit 2 for a discussion of changes in medical costs payable, including the impact of estimate changes on net income and EPS during the quarter.
Marketing, General and Administrative (MG&A) Expenses: MG&A expenses, excluding charges for the class action securities litigation settlement, were $142.3 million, resulting in an administrative loss ratio of 10.8% for the first quarter of 2003 compared to $130.2 million and an 11.3% administrative loss ratio in the first quarter of 2002. Broker commissions and premium taxes accounted for $45.7 million, or 32.1%, of total MG&A expenses in the first quarter of 2003 compared to $36.7 million, or 28.2%, of administrative expenses in 2002. The increase in these items as a percentage of overall MG&A expenses is primarily the result of changes in product mix between the two periods. Excluding the increase in these expense items, the Company"s ongoing MG&A expenses increased 3.3% over the first quarter of 2002.
Litigation Charge for Settlement, net: The first quarter of 2003 includes a $45 million pre-tax charge, or $0.32 per share, for the final settlement of the 1997 securities class action litigation. Under the terms of the Company"s previously announced $225 million settlement, the Company is required to fund a total of $208 million. Certain carriers under the first layer of the Company"s $200 million excess insurance will fund the remaining amount of the settlement. On April 7, 2003, the Company deposited $100 million into an escrow account as partial funding of its obligation and the balance of $108 million will be funded on May 6, 2003.
The Company believes that it is entitled to more than $41 million of additional recoveries from the insurance carriers above the first layer under its excess insurance policy who have refused to pay the required amounts under the policy. On April 25, 2003, the Company filed suit in Delaware state court against those carriers. The Company has not recorded any anticipated recoveries of these funds as of March 31, 2003.
Medical Costs Payable: Medical costs payable were $674.9 million as of March 31, 2003, compared to $618.6 million at December 31, 2002. The $56.3 million increase was primarily due to increased IBNR and claims reserves of $54 million. Days in medical costs payable increased by approximately two days to 60 days compared with the level at December 31, 2002. See Exhibit 3 for additional financial statistics related to medical costs payable and medical claims reserves.
Cash Flow: Cash flow from operations was $114.1 million compared to $7.4 million for the first quarter of 2002. The improvement for the quarter was primarily due to higher net income, including the non-cash charge for the securities litigation settlement, improved working capital management of premiums receivable and increases in medical costs payable and income taxes payable compared to the first quarter of 2002. First quarter 2003 cash flow from operations was approximately 1.6 times net income.
Parent Cash Balances: As of March 31, 2003, the parent company had approximately $150 million of free cash and investments. On April 1, 2003, the parent company received a $50 million dividend payment from its New York HMO subsidiary. Free parent company cash and investments were increased by an additional $65 million in late April as a result of completing new financings.
New Financings: The Company entered into new financings on April 25, 2003, consisting of a six-year $400 million Term Loan and a five-year $50 million Revolving Credit Facility. The proceeds of the financing were used to retire the Company"s former term loan ($119.2 million) and fund the Company"s obligation for the 1997 securities class action litigation settlement ($208 million), with the balance available for general corporate purposes.
The $400 million Term Loan initially bears interest at LIBOR + 275 basis points, 50 basis points below the former term loan, and has mandatory principal payments of 1% of the outstanding principal per year, payable quarterly, for the first five years and the balance due quarterly in the sixth year. The Company has entered into interest rate swap arrangements to convert a substantial portion of the Term Loan into fixed rates. The initial interest rate on the Term Loan is approximately 4.4%; inclusive of the interest rate swap arrangements.
Prepayments of Term Loan principal, if any, will be applied on a pro-rata basis against the scheduled amortization. The Company estimates that interest and financing costs for this financing will be in the range of $13 million to $14 million for 2003, based on current interest rates, interest rate swap arrangements and scheduled amortization. The Term Loan contains a covenant that requires the Company to maintain parent company cash and investment balances at a minimum of $75 million plus the next four quarters" scheduled principal payments under the loan in order to make restricted payments, as defined. Parent company cash and investments above the minimum requirements are available for restricted payments, which include share repurchases.
In April 2003, the Company wrote-off approximately $3.4 million of deferred financing costs as a result of the prepayment of its former term loan.
Share Repurchase Program: During the quarter, the Company repurchased 876,600 shares for $24.2 million at an average price of $27.62 per share. The Company has repurchased 20.67 million shares for $641.6 million since the inception of its share repurchase program in the third quarter of 2001. The Company has remaining repurchase authority of approximately $108.4 million under its share repurchase program.
Conference Call and Webcast
As previously announced, the Company will hold a conference call today at 9:00 am (Eastern Time) to review the results of the first quarter and to discuss management"s outlook for the remainder of 2003. The public is invited to listen to this conference call by dialing 1-888-677-8170 (using the password "Oxford") at least 10 minutes prior to the start of the call. Individuals who dial in will be asked to identify themselves and their affiliations. Investors, analysts and the public are also invited to listen to the conference call over the Internet by visiting our website at www.oxfordhealth.com. To listen to this call live on the Internet, visit the investor page of Oxford"s Web site at least 20 minutes early (to download and install any necessary audio software).
About Oxford
Founded in 1984, Oxford Health Plans, Inc. provides health plans to employers and individuals primarily in New York, New Jersey and Connecticut, through its direct sales force, independent insurance agents and brokers. Oxford"s services include traditional health maintenance organizations, point- of-service plans, Medicare plans and third party administration of employer- funded benefits plans. More information about Oxford Health Plans, Inc. is available at www.oxfordhealth.com.
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, including statements concerning the Company"s long-term strategy, funding of the balance of the settlement of the 1997 securities class action litigation settlement, and other statements contained herein regarding matters that are not historical facts, are forward- looking statements as defined in the Securities Exchange Act of 1934; 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:
* Changes in federal or state regulation relating to health care and
health benefit plans, including proposed patient protection legislation
and mandated benefits.
* The state of the economy.
* Rising medical costs or higher utilization of medical services,
including higher out-of-network utilization under point-of-service
plans and new drugs and technologies.
* Competitive pressure on the pricing of the Company"s products,
including acceptance of premium rate increases by the Company"s
commercial groups.
* Higher than expected administrative costs in operating the Company"s
business and the cost and impact on service of changing technologies.
* The ability of the Company to maintain risk transfer, risk sharing,
incentive and other provider arrangements and the resolution of
existing and future disputes over the reconciliations and performance
under such arrangements.
* Any changes in the Company"s estimates of its medical costs and
expected cost trends.
* The impact of future developments in various litigation including the
periodic examination, investigation and review of the Company by
various federal and state authorities.
* The Company"s ability to renew existing members and attract new
members.
* The Company"s ability to develop processes and systems to support its
operations and any future growth and administer new health care benefit
designs.
* Any future acts or threats of terrorism or war.
* Those factors included in the discussion under the caption "Cautionary
Statement Regarding Forward-Looking Statements" in Part I, Item 1, of
the Company"s Annual Report on Form 10-K for the fiscal year ended
December 31, 2002, and Part I, Item 2, of the Company"s Quarterly
Report on Form 10-Q for the period ended March 31, 2003.
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Income Statements
For the Three Months Ended March 31, 2003 and 2002
(In thousands, except per share, per member per month and membership
highlights data)
(Unaudited)
Three Months Ended
March 31,
2003 2002
Revenues:
Premiums earned $1,310,460 $1,144,144
Third-party administration, net 3,117 3,824
Investment and other income, net 31,555 21,164
Total revenues 1,345,132 1,169,132
Expenses:
Health care services 1,034,109 914,440
Marketing, general and administrative 142,250 130,188
Litigation charge for settlement, net 45,000 --
Interest and other financing charges 2,228 3,208
Total expenses 1,223,587 1,047,836
Earnings before income taxes 121,545 121,296
Income tax expense 48,620 49,852
Net earnings $72,925 $71,444
Earnings per common share - basic $0.87 $0.82
Earnings per common share - diluted $0.86 $0.78
Weighted-average common shares - basic 83,762 87,431
Dilutive effect of stock options 1,470 4,646
Weighted-average common shares - diluted 85,232 92,077
Selected Information
Medical loss ratio 78.9% 79.9%
Administrative loss ratio, excluding
litigation settlement charge 10.8% 11.3%
Earnings before income taxes, financing
charges, depreciation and
amortization ("EBITDA") $129,570 $129,403
PMPM premium revenue $283.99 $259.02
PMPM medical expense $224.10 $207.02
Fully insured member months 4,614.5 4,417.2
As of March 31,
Membership Highlights 2003 2002
POS, PPO and Other Plans 1,276,800 1,204,900
HMO 204,000 236,700
Total Fully Insured Commercial 1,480,800 1,441,600
Medicare 70,700 67,500
Third-party Administration 41,100 65,400
Total Membership 1,592,600 1,574,500
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of March 31, 2003 and December 31, 2002
(In thousands, except share data)
Assets
(Unaudited)
March 31, December 31,
2003 2002
Current assets:
Cash and cash equivalents $401,874 $321,627
Investments - available-for-sale, at
market value 1,130,643 1,102,664
Premiums receivable, net 37,539 29,803
Other receivables 60,111 43,919
Prepaid expenses and other current assets 15,734 10,214
Deferred income taxes 128,267 111,652
Total current assets 1,774,168 1,619,879
Property and equipment, net 34,152 34,445
Deferred income taxes 7,999 9,173
Restricted cash and investments 56,453 56,421
Goodwill and other intangible assets, net 25,608 24,691
Other noncurrent assets 8,628 8,907
Total assets $1,907,008 $1,753,516
Liabilities and Shareholders" Equity
Current liabilities:
Medical costs payable $674,942 $618,618
Current portion of long term debt 31,719 30,625
Trade accounts payable and accrued expenses 133,188 135,124
Reserve for litigation settlement 225,000 161,300
Unearned revenue 151,670 201,045
Income taxes payable 45,155 2,418
Current portion of long-term debt
and capital lease obligations 5,537 5,470
Total current liabilities 1,267,211 1,154,600
Obligation under capital lease 4,338 5,749
Long-term debt 87,500 96,250
Shareholders" equity:
Preferred stock, $.01 par value,
authorized 2,000,000 shares -- --
Common stock, $.01 par value, authorized
400,000,000 shares; issued and
outstanding 105,075,889 shares in 2002
and 100,353,007 shares in 2001 1,055 1,051
Additional paid-in capital 717,908 709,258
Retained earnings 510,055 437,130
Accumulated other comprehensive income 18,738 25,038
Treasury stock, at cost (699,797) (675,560)
Total shareholders" equity 547,959 496,917
Total liabilities and shareholders"
equity $1,907,008 $1,753,516
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2003 and 2002
(Unaudited) (In thousands)
Three Months Ended
March 31,
2003 2002
Cash flows from operating activities:
Net income $72,925 $71,443
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 6,070 5,178
Noncash income (4,146) (3,800)
Litigation and other noncash charges 45,000 --
Deferred income taxes (11,240) 5,901
Realized gain on sale of investments (13,723) (2,376)
Changes in assets and liabilities
(net of balances acquired):
Premiums receivable (7,736) (16,163)
Other receivables 808 1,191
Prepaid expenses and other current assets (5,520) 1,342
Medical costs payable 56,353 11,498
Trade accounts payable and
accrued expenses (23,131) (12,991)
Unearned revenue (45,229) (41,619)
Income taxes payable 43,290 (9,599)
Other, net 427 (2,653)
Net cash provided by operating
activities 114,148 7,352
Cash flows from investing activities:
Capital expenditures (3,588) (3,459)
Purchases of investments (462,412) (392,574)
Sales and maturities of investments 457,677 330,388
Acquisitions, net of cash acquired -- (1,898)
Net cash used by investing
activities (8,323) (67,543)
Cash flows from financing activities:
Proceeds from exercise of stock options 7,659 16,204
Redemption of notes payable (7,656) (6,563)
Payments under capital leases (1,344) --
Payment of withholding tax on option
exercises -- (24,056)
Purchase of treasury shares (24,237) (72,100)
Net cash used by financing
activities (25,578) (86,515)
Net increase (decrease) in cash and
cash equivalents 80,247 (146,706)
Cash and cash equivalents at
beginning of period 321,627 345,530
Cash and cash equivalents at end of period $401,874 $198,824
Exhibit 1
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Supplemental Schedule Reconciling GAAP Earnings to Run Rate Earnings
For the Three Months Ended March 31, 2003 and 2002
($ In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2003 2002
Diluted earnings per common share - GAAP $0.86 $0.78
Effect of run rate adjustments:
Litigation charge for settlement, net 0.32 --
Changes in estimates of prior
period medical cost reserves (0.05) (0.03)
Diluted earnings per common share - Run Rate $1.13 $0.75
Diluted common shares 85,232 92,077
Three Months Ended
March 31,
2003 2002
Net earnings - GAAP $72,925 $71,444
Effect of run rate adjustments:
Litigation charge for settlement, net 27,000 --
Changes in estimates of prior
period medical cost reserves (4,235) (3,002)
Net earnings - Run Rate $95,690 $68,442
Note: Exhibit 1 above reconciles the differences between run rate earnings and our net earnings calculated and presented in accordance with generally accepted accounting principles ("GAAP"). Management believes that presentation of run rate earnings provides useful information to investors regarding the Company"s results of operations because such presentation facilitates the period-to-period comparison of operating performance by eliminating charges for settlement of the 1997 securities class action litigation, which charges are unrelated to current period operating performance, and by eliminating the current period impact of changes to the Company"s estimates of prior period medical cost reserves.
Run Rate Adjustments
During the first quarter of 2003, the Company recorded a pre-tax charge of $45 million for the final settlement of its 1997 securities class action litigation. This charge, which is included on a separate line on the accompanying income statement, reduced net earnings by $27 million, or $0.32 per diluted common share.
During the first quarters of 2003 and 2002, the Company had favorable net prior period reserve adjustments ("PPRAs") of medical costs of approximately $7.1 million and $5.1 million, respectively. These PPRAs had the effect of increasing reported net earnings by $4.2 million in 2003 and $3.0 million in 2002, or $0.05 per diluted common share in 2003 and $0.03 per diluted common share in 2002.
Excluding the impact of these items, run rate net earnings increased $27.2 million, or 40%, to $95.7 million for the first quarter of 2003 compared to run rate earnings of $68.4 million for the first quarter of 2002. Run rate earnings per diluted common share increased $0.38 per share, or 51%, to $1.13 per share compared to $0.75 per share for the first quarter of 2002.
Exhibit 2
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Changes in Medical Costs Payable
For the Three Months Ended March 31, 2003 and 2002
($ In millions)
(Unaudited)
Amounts Relating to
Three Months Ended March 31, 2003 Claims Incurred During
2002 and
Total 2003 Prior
Balance as of December 31, 2002 $618.6 $-- $618.6
Components of health care services
expense:
Estimated costs incurred 1,041.2 1,041.2 --
Estimate changes (7.1) -- (7.1)
Health care services expense 1,034.1 1,041.2 (7.1)
Payments for health care services (977.8) (506.3) (471.5)
Balance as of March 31, 2003 $674.9 $534.9 $140.0
Amounts Relating to
Three Months Ended March 31, 2002 Claims Incurred During
2001 and
Total 2002 Prior
Balance as of December 31, 2001 $595.1 $-- $595.1
Medical payables acquired 25.7 -- 25.7
Components of health care services
expense:
Estimated costs incurred 919.5 919.5 --
Estimate changes (5.1) -- (5.1)
Health care services expense 914.4 919.5 (5.1)
Payments for health care services (904.1) (476.7) (427.4)
Balance as of March 31, 2002 $631.1 $442.8 $188.3
Changes in Medical Costs Payable
During the first quarter of 2003, the Company incurred estimated health care services expenses of $1.04 billion compared to $919.5 million in the first quarter of 2002, an increase of $122 million quarter over quarter. During the first quarter of 2003, the Company paid approximately 48.6% of its estimated incurred claims versus 51.8% in the first quarter of 2002. The reduction in the percentage of current year claims paid is a result of more effective working capital management together with overall higher levels of IBNR reserves. The Company"s reserving methodologies for the current quarter are consistent with prior periods.
During the first quarter of 2003, net favorable PPRAs were $7.1 million compared to $5.1 million favorable in the first quarter of 2002. As the Company"s claims processing continues to improve and the tail of its incurred claims is shortened, the amount of ending reserve related to prior year periods continues to decline. As of March 31, 2003, approximately 20.7% of total medical costs payable were for prior years compared to approximately 29.8% as of March 31, 2002.
Exhibit 3
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
COMPONENTS OF MEDICAL COSTS PAYABLE
As of March 31, 2003 and 2002 and December 31, 2002
($ In millions)
(Unaudited)
Amounts Relating to
Claims Incurred During
As of March 31, 2003 Total 2003 2002 and
Prior
IBNR and medical claims reserves $609.7 $505.2 $104.5
Pharmacy PBM payable 25.5 25.5 --
Stabilization and stop-loss pools,
BDCC and GME reserves, net 19.3 4.2 15.1
Other reserves 20.4 -- 20.4
Medical Costs Payable Balance $674.9 $534.9 $140.0
Amounts Relating to
Claims Incurred During
As of March 31, 2002 Total 2002 2001 and
Prior
IBNR and medical claims reserves $535.5 $394.2 $141.3
Pharmacy PBM payable 20.9 20.9 --
Stabilization and stop-loss pools,
BDCC and GME reserves, net 45.3 16.4 28.9
Other reserves 29.4 11.3 18.1
Medical Costs Payable Balance $631.1 $442.8 $188.3
Amounts Relating to
Claims Incurred During
As of December 31, 2002 Total 2002 2001 and
Prior
IBNR and medical claims reserves $555.7 $521.8 $33.9
Pharmacy PBM payable 26.7 26.7 --
Stabilization and stop-loss pools,
BDCC and GME reserves, net 13.9 8.5 5.4
Other reserves 22.3 -- 22.3
Medical Costs Payable Balance $618.6 $557.0 $61.6
Definitions
IBNR and medical claims reserves: Estimates of liabilities for incurred but unreported medical claims including in-house inventories, adjudicated but not yet paid claims, net liabilities under risk sharing arrangements and reserves for previously denied claims.
Pharmacy PBM payable: Bi-weekly amounts due to the Company"s pharmacy benefit manager based on submission of pharmacy claims.
Stabilization and stop-loss pools, BDCC and GME reserves, net: Estimated net liabilities related to various state programs including New York market stabilization and stop-loss pools, bad debt and charity care and graduate medical education surcharges.
Other reserves: Estimated liabilities for certain former medical contracts that are in various stages of resolution.
Components of Medical Costs Payable
During the first quarter of 2003, medical costs payable increased $56.3 million over the balance at December 31, 2002, and $43.8 million over the balance at March 31, 2002. IBNR and medical claims reserves represented 90.3% of total medical costs payable at March 31, 2003, compared to 84.9% at March 31, 2002. The percentage of IBNR and medical claims reserves related to claims incurred in prior years was 17.1% at March 31, 2003, compared to 26.4% at March 31, 2002. This improved aging of claims reserves is a result of the Company"s improved and accelerated claims adjudication and the shortening of incurred claims tails through electronic initiatives. This increased visibility has contributed to the Company"s ability to estimate its claims reserves in a relatively narrow and predictable range, as evidenced by the consistent and modest level of PPRAs in the quarters as displayed on Exhibit 1. Total days medical costs payable at March 31, 2003 were 60 days, representing an increase of two days during the quarter.
Exhibit 4
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
SELECTED FINANCIAL STATISTICS
($ in Thousands, except PMPM data)
(Unaudited)
2003 2002 2001
1Q Full Year 4Q 3Q 2Q 1Q Full Year
Commercial
Premium
Revenues $1,155.1 $4,265.8 $1,115.2 $1,094.4 $1,055.1 $1,001.1 $3,653.1
Medicare
Premium
Revenues 155.4 585.2 147.4 147.3 147.5 143.0 659.3
Total
Premium
Revenues $1,310.5 $4,851.0 $1,262.6 $1,241.7 $1,202.6 $1,144.1 $4,312.4
Commercial
Medical
Costs $903.5 $3,374.9 $893.2 $828.2 $855.3 $798.2 $2,865.6
Medicare
Medical
Costs 130.6 473.9 119.9 116.3 121.5 116.2 535.7
Total Health
Care
Services
Expense $1,034.1 $3,848.8 $1,013.1 $944.5 $976.8 $914.4 $3,401.3
Commercial
PMPM
Revenue $262.36 $244.11 $250.80 $246.85 $240.96 $237.42 $222.74
Medicare
PMPM
Revenue $733.53 $710.36 $702.50 $706.47 $719.78 $713.01 $658.21
Commercial
PMPM Medical
Costs $205.21 $193.13 $200.89 $186.79 $195.34 $189.30 $174.73
Medicare
PMPM Medical
Costs $616.66 $575.26 $571.32 $558.28 $592.58 $579.32 $534.84
Commercial
Medical Loss
Ratio 78.2% 79.1% 80.1% 75.7% 81.1% 79.7% 78.4%
Medicare
Medical Loss
Ratio 84.1% 81.0% 81.3% 79.0% 82.3% 81.2% 81.2%
Total
Medical Loss
Ratio 78.9% 79.3% 80.2% 76.1% 81.2% 79.9% 78.9%
MG&A
Expenses (1) $142.3 $575.4 $157.7 $135.5 $152.0 $130.2 $489.1
Administrative
Loss Ratio
(ALR) (1) 10.8% 11.8% 12.5% 10.9% 12.6% 11.3% 11.3%
ALR Run
Rate (2) 10.8% 11.1% 10.9% 10.9% 11.3% 11.3% 11.1%
1. Excludes net litigation settlement charges of $151.3 million in
third quarter of 2002 and $45 million in first quarter of 2003.
2. Run Rate ALR excludes all charges related to the securities class
action litigation settlement and defense costs in the first quarter of
2003 ($45 million), the third quarter of 2002 ($151.3 million) and
fourth quarter of 2002 ($20 million) and the termination charge for
the CSC contract ($15.5 million) in the second quarter of 2002.
Selected Trends and Operating Statistics
Commercial premium revenues increased $154 million over the first quarter of 2002. Commercial premium yields, net of product mix and benefit changes, increased approximately 10.5% over the first quarter of 2002. Medicare premiums increased $12.4 million as a result of increased membership, the mix of membership and increased reimbursement rates.
Commercial medical costs increased $105.3 million over the first quarter of 2002. Net commercial PMPM medical costs increased 8.4% compared to the first quarter of 2002. The net PMPM increase in medical costs in the first quarter of 2003 was favorably impacted by: (1) the Company"s healthcare cost initiatives, (2) PPRAs (which are not included in the Company"s projections), (3) lower than projected trends in certain service categories and (4) adverse weather in the Company"s markets. The components of the increase in net commercial medical trends were just over ten percent for inpatient, middle single digits for professional and in the mid-teens for outpatient and pharmacy for the first quarter of 2003 compared to the first quarter of 2002.
Exhibit 5
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
MEMBERSHIP DATA
(in Thousands)
(Unaudited)
Total Membership 2003 2002 2001
1Q 4Q 3Q 2Q 1Q 4Q
POS, PPO and Other
Plans 1,276.8 1,252.9 1,249.8 1,236.0 1,204.9 1,154.1
HMO 204.0 226.6 229.0 233.6 236.7 218.2
Total Fully Insured
Commercial
Membership 1,480.8 1,479.5 1,478.8 1,469.6 1,441.6 1,372.3
Medicare 70.7 70.1 69.6 68.9 67.5 77.8
Third-party
Administration 41.1 51.9 62.7 63.3 65.4 60.0
Total Membership 1,592.6 1,601.5 1,611.1 1,601.8 1,574.5 1,510.1
Fully Insured
Commercial Growth 1.3 0.7 9.2 28.0 69.3 5.7
Fully Insured
Commercial Growth % 0.1% 0.0% 0.6% 1.9% 5.0% 0.4%
Membership
Fully insured commercial membership at the end of the first quarter of 2003 was approximately 39,200 members higher than at the end of the first quarter of 2002 and approximately 1,300 members over year-end 2002. Fully insured commercial membership for Oxford increased approximately 14,300 members in the first quarter, while MedSpan membership declined by approximately 13,000 members as the Company continued to rationalize the pricing of the business acquired late in the first quarter of 2002.
SOURCE Oxford Health Plans, Inc.
Web Site: http://www.oxfordhealth.com
Photo Notes:
http://www.newscom.com/cgi-bin/prnh/20001212/OXHPLOGO
Company News On Call: Company News On-Call:
http://www.prnewswire.com/comp/104612.html
Business Highlights
Membership: Fully insured commercial membership, excluding reductions in MedSpan membership, increased approximately 14,300 members during the first quarter over year-end 2002 membership. MedSpan membership declined by approximately 13,000 members during the quarter as the Company completed the annual renewal cycle for this business acquired in early 2002. Total fully insured commercial membership ended the quarter at 1.481 million members compared to 1.479 million members at the end of 2002 and 1.442 million members in the first quarter of 2002. Medicare membership increased during the first quarter by over 600 members, ending the period at 70,700 members. See Exhibit 5 for historical membership statistics.
Premium Revenue: Premium revenue increased 14.5% in the first quarter, to $1.31 billion, compared to the first quarter of 2002. Commercial premiums increased 15.4% to $1.15 billion compared to $1.00 billion in the first quarter of 2002. This premium growth was due to a 4.4% increase in commercial member months and a net premium yield increase of approximately 10.5%. Medicare premiums, which represented 11.9% of total premiums, increased 8.6% to $155.4 million compared to $143.0 million in the first quarter of 2002. See Exhibit 4 for premium PMPM statistics and analysis.
Investment and Other Income, net: Investment and other income, net, was $31.6 million compared to $21.2 million in the first quarter of 2002. Realized gains were $13.7 million compared to $2.4 million in the first quarter of 2002. The realized gains in the first quarter of 2003 were primarily the result of the Company taking advantage of market value increases in its investments in U.S. Treasuries. The net pre-tax yield on the Company"s portfolio of investments was approximately 3.6% during the first quarter of 2003 compared to approximately 4.7% during the first quarter of 2002.
Health Care Services Expense: Health care services expense was $1.034 billion compared to $914.4 million in the first quarter of 2002. The Company"s medical loss ratio improved in the first quarter of 2003 by 100 basis points to 78.9% compared to 79.9% in the first quarter of 2002 and was 130 basis points below the fourth quarter of 2002. During the first quarter of 2003, net per member per month commercial medical costs increased approximately 8.4% compared to the first quarter of 2002. See Exhibit 4 for medical PMPM statistics and analysis.
Net favorable development of prior period medical reserves was $7.1 million compared to approximately $5.1 million in the first quarter of 2002. See Exhibit 2 for a discussion of changes in medical costs payable, including the impact of estimate changes on net income and EPS during the quarter.
Marketing, General and Administrative (MG&A) Expenses: MG&A expenses, excluding charges for the class action securities litigation settlement, were $142.3 million, resulting in an administrative loss ratio of 10.8% for the first quarter of 2003 compared to $130.2 million and an 11.3% administrative loss ratio in the first quarter of 2002. Broker commissions and premium taxes accounted for $45.7 million, or 32.1%, of total MG&A expenses in the first quarter of 2003 compared to $36.7 million, or 28.2%, of administrative expenses in 2002. The increase in these items as a percentage of overall MG&A expenses is primarily the result of changes in product mix between the two periods. Excluding the increase in these expense items, the Company"s ongoing MG&A expenses increased 3.3% over the first quarter of 2002.
Litigation Charge for Settlement, net: The first quarter of 2003 includes a $45 million pre-tax charge, or $0.32 per share, for the final settlement of the 1997 securities class action litigation. Under the terms of the Company"s previously announced $225 million settlement, the Company is required to fund a total of $208 million. Certain carriers under the first layer of the Company"s $200 million excess insurance will fund the remaining amount of the settlement. On April 7, 2003, the Company deposited $100 million into an escrow account as partial funding of its obligation and the balance of $108 million will be funded on May 6, 2003.
The Company believes that it is entitled to more than $41 million of additional recoveries from the insurance carriers above the first layer under its excess insurance policy who have refused to pay the required amounts under the policy. On April 25, 2003, the Company filed suit in Delaware state court against those carriers. The Company has not recorded any anticipated recoveries of these funds as of March 31, 2003.
Medical Costs Payable: Medical costs payable were $674.9 million as of March 31, 2003, compared to $618.6 million at December 31, 2002. The $56.3 million increase was primarily due to increased IBNR and claims reserves of $54 million. Days in medical costs payable increased by approximately two days to 60 days compared with the level at December 31, 2002. See Exhibit 3 for additional financial statistics related to medical costs payable and medical claims reserves.
Cash Flow: Cash flow from operations was $114.1 million compared to $7.4 million for the first quarter of 2002. The improvement for the quarter was primarily due to higher net income, including the non-cash charge for the securities litigation settlement, improved working capital management of premiums receivable and increases in medical costs payable and income taxes payable compared to the first quarter of 2002. First quarter 2003 cash flow from operations was approximately 1.6 times net income.
Parent Cash Balances: As of March 31, 2003, the parent company had approximately $150 million of free cash and investments. On April 1, 2003, the parent company received a $50 million dividend payment from its New York HMO subsidiary. Free parent company cash and investments were increased by an additional $65 million in late April as a result of completing new financings.
New Financings: The Company entered into new financings on April 25, 2003, consisting of a six-year $400 million Term Loan and a five-year $50 million Revolving Credit Facility. The proceeds of the financing were used to retire the Company"s former term loan ($119.2 million) and fund the Company"s obligation for the 1997 securities class action litigation settlement ($208 million), with the balance available for general corporate purposes.
The $400 million Term Loan initially bears interest at LIBOR + 275 basis points, 50 basis points below the former term loan, and has mandatory principal payments of 1% of the outstanding principal per year, payable quarterly, for the first five years and the balance due quarterly in the sixth year. The Company has entered into interest rate swap arrangements to convert a substantial portion of the Term Loan into fixed rates. The initial interest rate on the Term Loan is approximately 4.4%; inclusive of the interest rate swap arrangements.
Prepayments of Term Loan principal, if any, will be applied on a pro-rata basis against the scheduled amortization. The Company estimates that interest and financing costs for this financing will be in the range of $13 million to $14 million for 2003, based on current interest rates, interest rate swap arrangements and scheduled amortization. The Term Loan contains a covenant that requires the Company to maintain parent company cash and investment balances at a minimum of $75 million plus the next four quarters" scheduled principal payments under the loan in order to make restricted payments, as defined. Parent company cash and investments above the minimum requirements are available for restricted payments, which include share repurchases.
In April 2003, the Company wrote-off approximately $3.4 million of deferred financing costs as a result of the prepayment of its former term loan.
Share Repurchase Program: During the quarter, the Company repurchased 876,600 shares for $24.2 million at an average price of $27.62 per share. The Company has repurchased 20.67 million shares for $641.6 million since the inception of its share repurchase program in the third quarter of 2001. The Company has remaining repurchase authority of approximately $108.4 million under its share repurchase program.
Conference Call and Webcast
As previously announced, the Company will hold a conference call today at 9:00 am (Eastern Time) to review the results of the first quarter and to discuss management"s outlook for the remainder of 2003. The public is invited to listen to this conference call by dialing 1-888-677-8170 (using the password "Oxford") at least 10 minutes prior to the start of the call. Individuals who dial in will be asked to identify themselves and their affiliations. Investors, analysts and the public are also invited to listen to the conference call over the Internet by visiting our website at www.oxfordhealth.com. To listen to this call live on the Internet, visit the investor page of Oxford"s Web site at least 20 minutes early (to download and install any necessary audio software).
About Oxford
Founded in 1984, Oxford Health Plans, Inc. provides health plans to employers and individuals primarily in New York, New Jersey and Connecticut, through its direct sales force, independent insurance agents and brokers. Oxford"s services include traditional health maintenance organizations, point- of-service plans, Medicare plans and third party administration of employer- funded benefits plans. More information about Oxford Health Plans, Inc. is available at www.oxfordhealth.com.
Safe Harbor Statement Under the Private Securities
Litigation Reform Act of 1995
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release, including statements concerning the Company"s long-term strategy, funding of the balance of the settlement of the 1997 securities class action litigation settlement, and other statements contained herein regarding matters that are not historical facts, are forward- looking statements as defined in the Securities Exchange Act of 1934; 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:
* Changes in federal or state regulation relating to health care and
health benefit plans, including proposed patient protection legislation
and mandated benefits.
* The state of the economy.
* Rising medical costs or higher utilization of medical services,
including higher out-of-network utilization under point-of-service
plans and new drugs and technologies.
* Competitive pressure on the pricing of the Company"s products,
including acceptance of premium rate increases by the Company"s
commercial groups.
* Higher than expected administrative costs in operating the Company"s
business and the cost and impact on service of changing technologies.
* The ability of the Company to maintain risk transfer, risk sharing,
incentive and other provider arrangements and the resolution of
existing and future disputes over the reconciliations and performance
under such arrangements.
* Any changes in the Company"s estimates of its medical costs and
expected cost trends.
* The impact of future developments in various litigation including the
periodic examination, investigation and review of the Company by
various federal and state authorities.
* The Company"s ability to renew existing members and attract new
members.
* The Company"s ability to develop processes and systems to support its
operations and any future growth and administer new health care benefit
designs.
* Any future acts or threats of terrorism or war.
* Those factors included in the discussion under the caption "Cautionary
Statement Regarding Forward-Looking Statements" in Part I, Item 1, of
the Company"s Annual Report on Form 10-K for the fiscal year ended
December 31, 2002, and Part I, Item 2, of the Company"s Quarterly
Report on Form 10-Q for the period ended March 31, 2003.
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Income Statements
For the Three Months Ended March 31, 2003 and 2002
(In thousands, except per share, per member per month and membership
highlights data)
(Unaudited)
Three Months Ended
March 31,
2003 2002
Revenues:
Premiums earned $1,310,460 $1,144,144
Third-party administration, net 3,117 3,824
Investment and other income, net 31,555 21,164
Total revenues 1,345,132 1,169,132
Expenses:
Health care services 1,034,109 914,440
Marketing, general and administrative 142,250 130,188
Litigation charge for settlement, net 45,000 --
Interest and other financing charges 2,228 3,208
Total expenses 1,223,587 1,047,836
Earnings before income taxes 121,545 121,296
Income tax expense 48,620 49,852
Net earnings $72,925 $71,444
Earnings per common share - basic $0.87 $0.82
Earnings per common share - diluted $0.86 $0.78
Weighted-average common shares - basic 83,762 87,431
Dilutive effect of stock options 1,470 4,646
Weighted-average common shares - diluted 85,232 92,077
Selected Information
Medical loss ratio 78.9% 79.9%
Administrative loss ratio, excluding
litigation settlement charge 10.8% 11.3%
Earnings before income taxes, financing
charges, depreciation and
amortization ("EBITDA") $129,570 $129,403
PMPM premium revenue $283.99 $259.02
PMPM medical expense $224.10 $207.02
Fully insured member months 4,614.5 4,417.2
As of March 31,
Membership Highlights 2003 2002
POS, PPO and Other Plans 1,276,800 1,204,900
HMO 204,000 236,700
Total Fully Insured Commercial 1,480,800 1,441,600
Medicare 70,700 67,500
Third-party Administration 41,100 65,400
Total Membership 1,592,600 1,574,500
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
As of March 31, 2003 and December 31, 2002
(In thousands, except share data)
Assets
(Unaudited)
March 31, December 31,
2003 2002
Current assets:
Cash and cash equivalents $401,874 $321,627
Investments - available-for-sale, at
market value 1,130,643 1,102,664
Premiums receivable, net 37,539 29,803
Other receivables 60,111 43,919
Prepaid expenses and other current assets 15,734 10,214
Deferred income taxes 128,267 111,652
Total current assets 1,774,168 1,619,879
Property and equipment, net 34,152 34,445
Deferred income taxes 7,999 9,173
Restricted cash and investments 56,453 56,421
Goodwill and other intangible assets, net 25,608 24,691
Other noncurrent assets 8,628 8,907
Total assets $1,907,008 $1,753,516
Liabilities and Shareholders" Equity
Current liabilities:
Medical costs payable $674,942 $618,618
Current portion of long term debt 31,719 30,625
Trade accounts payable and accrued expenses 133,188 135,124
Reserve for litigation settlement 225,000 161,300
Unearned revenue 151,670 201,045
Income taxes payable 45,155 2,418
Current portion of long-term debt
and capital lease obligations 5,537 5,470
Total current liabilities 1,267,211 1,154,600
Obligation under capital lease 4,338 5,749
Long-term debt 87,500 96,250
Shareholders" equity:
Preferred stock, $.01 par value,
authorized 2,000,000 shares -- --
Common stock, $.01 par value, authorized
400,000,000 shares; issued and
outstanding 105,075,889 shares in 2002
and 100,353,007 shares in 2001 1,055 1,051
Additional paid-in capital 717,908 709,258
Retained earnings 510,055 437,130
Accumulated other comprehensive income 18,738 25,038
Treasury stock, at cost (699,797) (675,560)
Total shareholders" equity 547,959 496,917
Total liabilities and shareholders"
equity $1,907,008 $1,753,516
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2003 and 2002
(Unaudited) (In thousands)
Three Months Ended
March 31,
2003 2002
Cash flows from operating activities:
Net income $72,925 $71,443
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 6,070 5,178
Noncash income (4,146) (3,800)
Litigation and other noncash charges 45,000 --
Deferred income taxes (11,240) 5,901
Realized gain on sale of investments (13,723) (2,376)
Changes in assets and liabilities
(net of balances acquired):
Premiums receivable (7,736) (16,163)
Other receivables 808 1,191
Prepaid expenses and other current assets (5,520) 1,342
Medical costs payable 56,353 11,498
Trade accounts payable and
accrued expenses (23,131) (12,991)
Unearned revenue (45,229) (41,619)
Income taxes payable 43,290 (9,599)
Other, net 427 (2,653)
Net cash provided by operating
activities 114,148 7,352
Cash flows from investing activities:
Capital expenditures (3,588) (3,459)
Purchases of investments (462,412) (392,574)
Sales and maturities of investments 457,677 330,388
Acquisitions, net of cash acquired -- (1,898)
Net cash used by investing
activities (8,323) (67,543)
Cash flows from financing activities:
Proceeds from exercise of stock options 7,659 16,204
Redemption of notes payable (7,656) (6,563)
Payments under capital leases (1,344) --
Payment of withholding tax on option
exercises -- (24,056)
Purchase of treasury shares (24,237) (72,100)
Net cash used by financing
activities (25,578) (86,515)
Net increase (decrease) in cash and
cash equivalents 80,247 (146,706)
Cash and cash equivalents at
beginning of period 321,627 345,530
Cash and cash equivalents at end of period $401,874 $198,824
Exhibit 1
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Supplemental Schedule Reconciling GAAP Earnings to Run Rate Earnings
For the Three Months Ended March 31, 2003 and 2002
($ In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2003 2002
Diluted earnings per common share - GAAP $0.86 $0.78
Effect of run rate adjustments:
Litigation charge for settlement, net 0.32 --
Changes in estimates of prior
period medical cost reserves (0.05) (0.03)
Diluted earnings per common share - Run Rate $1.13 $0.75
Diluted common shares 85,232 92,077
Three Months Ended
March 31,
2003 2002
Net earnings - GAAP $72,925 $71,444
Effect of run rate adjustments:
Litigation charge for settlement, net 27,000 --
Changes in estimates of prior
period medical cost reserves (4,235) (3,002)
Net earnings - Run Rate $95,690 $68,442
Note: Exhibit 1 above reconciles the differences between run rate earnings and our net earnings calculated and presented in accordance with generally accepted accounting principles ("GAAP"). Management believes that presentation of run rate earnings provides useful information to investors regarding the Company"s results of operations because such presentation facilitates the period-to-period comparison of operating performance by eliminating charges for settlement of the 1997 securities class action litigation, which charges are unrelated to current period operating performance, and by eliminating the current period impact of changes to the Company"s estimates of prior period medical cost reserves.
Run Rate Adjustments
During the first quarter of 2003, the Company recorded a pre-tax charge of $45 million for the final settlement of its 1997 securities class action litigation. This charge, which is included on a separate line on the accompanying income statement, reduced net earnings by $27 million, or $0.32 per diluted common share.
During the first quarters of 2003 and 2002, the Company had favorable net prior period reserve adjustments ("PPRAs") of medical costs of approximately $7.1 million and $5.1 million, respectively. These PPRAs had the effect of increasing reported net earnings by $4.2 million in 2003 and $3.0 million in 2002, or $0.05 per diluted common share in 2003 and $0.03 per diluted common share in 2002.
Excluding the impact of these items, run rate net earnings increased $27.2 million, or 40%, to $95.7 million for the first quarter of 2003 compared to run rate earnings of $68.4 million for the first quarter of 2002. Run rate earnings per diluted common share increased $0.38 per share, or 51%, to $1.13 per share compared to $0.75 per share for the first quarter of 2002.
Exhibit 2
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
Changes in Medical Costs Payable
For the Three Months Ended March 31, 2003 and 2002
($ In millions)
(Unaudited)
Amounts Relating to
Three Months Ended March 31, 2003 Claims Incurred During
2002 and
Total 2003 Prior
Balance as of December 31, 2002 $618.6 $-- $618.6
Components of health care services
expense:
Estimated costs incurred 1,041.2 1,041.2 --
Estimate changes (7.1) -- (7.1)
Health care services expense 1,034.1 1,041.2 (7.1)
Payments for health care services (977.8) (506.3) (471.5)
Balance as of March 31, 2003 $674.9 $534.9 $140.0
Amounts Relating to
Three Months Ended March 31, 2002 Claims Incurred During
2001 and
Total 2002 Prior
Balance as of December 31, 2001 $595.1 $-- $595.1
Medical payables acquired 25.7 -- 25.7
Components of health care services
expense:
Estimated costs incurred 919.5 919.5 --
Estimate changes (5.1) -- (5.1)
Health care services expense 914.4 919.5 (5.1)
Payments for health care services (904.1) (476.7) (427.4)
Balance as of March 31, 2002 $631.1 $442.8 $188.3
Changes in Medical Costs Payable
During the first quarter of 2003, the Company incurred estimated health care services expenses of $1.04 billion compared to $919.5 million in the first quarter of 2002, an increase of $122 million quarter over quarter. During the first quarter of 2003, the Company paid approximately 48.6% of its estimated incurred claims versus 51.8% in the first quarter of 2002. The reduction in the percentage of current year claims paid is a result of more effective working capital management together with overall higher levels of IBNR reserves. The Company"s reserving methodologies for the current quarter are consistent with prior periods.
During the first quarter of 2003, net favorable PPRAs were $7.1 million compared to $5.1 million favorable in the first quarter of 2002. As the Company"s claims processing continues to improve and the tail of its incurred claims is shortened, the amount of ending reserve related to prior year periods continues to decline. As of March 31, 2003, approximately 20.7% of total medical costs payable were for prior years compared to approximately 29.8% as of March 31, 2002.
Exhibit 3
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
COMPONENTS OF MEDICAL COSTS PAYABLE
As of March 31, 2003 and 2002 and December 31, 2002
($ In millions)
(Unaudited)
Amounts Relating to
Claims Incurred During
As of March 31, 2003 Total 2003 2002 and
Prior
IBNR and medical claims reserves $609.7 $505.2 $104.5
Pharmacy PBM payable 25.5 25.5 --
Stabilization and stop-loss pools,
BDCC and GME reserves, net 19.3 4.2 15.1
Other reserves 20.4 -- 20.4
Medical Costs Payable Balance $674.9 $534.9 $140.0
Amounts Relating to
Claims Incurred During
As of March 31, 2002 Total 2002 2001 and
Prior
IBNR and medical claims reserves $535.5 $394.2 $141.3
Pharmacy PBM payable 20.9 20.9 --
Stabilization and stop-loss pools,
BDCC and GME reserves, net 45.3 16.4 28.9
Other reserves 29.4 11.3 18.1
Medical Costs Payable Balance $631.1 $442.8 $188.3
Amounts Relating to
Claims Incurred During
As of December 31, 2002 Total 2002 2001 and
Prior
IBNR and medical claims reserves $555.7 $521.8 $33.9
Pharmacy PBM payable 26.7 26.7 --
Stabilization and stop-loss pools,
BDCC and GME reserves, net 13.9 8.5 5.4
Other reserves 22.3 -- 22.3
Medical Costs Payable Balance $618.6 $557.0 $61.6
Definitions
IBNR and medical claims reserves: Estimates of liabilities for incurred but unreported medical claims including in-house inventories, adjudicated but not yet paid claims, net liabilities under risk sharing arrangements and reserves for previously denied claims.
Pharmacy PBM payable: Bi-weekly amounts due to the Company"s pharmacy benefit manager based on submission of pharmacy claims.
Stabilization and stop-loss pools, BDCC and GME reserves, net: Estimated net liabilities related to various state programs including New York market stabilization and stop-loss pools, bad debt and charity care and graduate medical education surcharges.
Other reserves: Estimated liabilities for certain former medical contracts that are in various stages of resolution.
Components of Medical Costs Payable
During the first quarter of 2003, medical costs payable increased $56.3 million over the balance at December 31, 2002, and $43.8 million over the balance at March 31, 2002. IBNR and medical claims reserves represented 90.3% of total medical costs payable at March 31, 2003, compared to 84.9% at March 31, 2002. The percentage of IBNR and medical claims reserves related to claims incurred in prior years was 17.1% at March 31, 2003, compared to 26.4% at March 31, 2002. This improved aging of claims reserves is a result of the Company"s improved and accelerated claims adjudication and the shortening of incurred claims tails through electronic initiatives. This increased visibility has contributed to the Company"s ability to estimate its claims reserves in a relatively narrow and predictable range, as evidenced by the consistent and modest level of PPRAs in the quarters as displayed on Exhibit 1. Total days medical costs payable at March 31, 2003 were 60 days, representing an increase of two days during the quarter.
Exhibit 4
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
SELECTED FINANCIAL STATISTICS
($ in Thousands, except PMPM data)
(Unaudited)
2003 2002 2001
1Q Full Year 4Q 3Q 2Q 1Q Full Year
Commercial
Premium
Revenues $1,155.1 $4,265.8 $1,115.2 $1,094.4 $1,055.1 $1,001.1 $3,653.1
Medicare
Premium
Revenues 155.4 585.2 147.4 147.3 147.5 143.0 659.3
Total
Premium
Revenues $1,310.5 $4,851.0 $1,262.6 $1,241.7 $1,202.6 $1,144.1 $4,312.4
Commercial
Medical
Costs $903.5 $3,374.9 $893.2 $828.2 $855.3 $798.2 $2,865.6
Medicare
Medical
Costs 130.6 473.9 119.9 116.3 121.5 116.2 535.7
Total Health
Care
Services
Expense $1,034.1 $3,848.8 $1,013.1 $944.5 $976.8 $914.4 $3,401.3
Commercial
PMPM
Revenue $262.36 $244.11 $250.80 $246.85 $240.96 $237.42 $222.74
Medicare
PMPM
Revenue $733.53 $710.36 $702.50 $706.47 $719.78 $713.01 $658.21
Commercial
PMPM Medical
Costs $205.21 $193.13 $200.89 $186.79 $195.34 $189.30 $174.73
Medicare
PMPM Medical
Costs $616.66 $575.26 $571.32 $558.28 $592.58 $579.32 $534.84
Commercial
Medical Loss
Ratio 78.2% 79.1% 80.1% 75.7% 81.1% 79.7% 78.4%
Medicare
Medical Loss
Ratio 84.1% 81.0% 81.3% 79.0% 82.3% 81.2% 81.2%
Total
Medical Loss
Ratio 78.9% 79.3% 80.2% 76.1% 81.2% 79.9% 78.9%
MG&A
Expenses (1) $142.3 $575.4 $157.7 $135.5 $152.0 $130.2 $489.1
Administrative
Loss Ratio
(ALR) (1) 10.8% 11.8% 12.5% 10.9% 12.6% 11.3% 11.3%
ALR Run
Rate (2) 10.8% 11.1% 10.9% 10.9% 11.3% 11.3% 11.1%
1. Excludes net litigation settlement charges of $151.3 million in
third quarter of 2002 and $45 million in first quarter of 2003.
2. Run Rate ALR excludes all charges related to the securities class
action litigation settlement and defense costs in the first quarter of
2003 ($45 million), the third quarter of 2002 ($151.3 million) and
fourth quarter of 2002 ($20 million) and the termination charge for
the CSC contract ($15.5 million) in the second quarter of 2002.
Selected Trends and Operating Statistics
Commercial premium revenues increased $154 million over the first quarter of 2002. Commercial premium yields, net of product mix and benefit changes, increased approximately 10.5% over the first quarter of 2002. Medicare premiums increased $12.4 million as a result of increased membership, the mix of membership and increased reimbursement rates.
Commercial medical costs increased $105.3 million over the first quarter of 2002. Net commercial PMPM medical costs increased 8.4% compared to the first quarter of 2002. The net PMPM increase in medical costs in the first quarter of 2003 was favorably impacted by: (1) the Company"s healthcare cost initiatives, (2) PPRAs (which are not included in the Company"s projections), (3) lower than projected trends in certain service categories and (4) adverse weather in the Company"s markets. The components of the increase in net commercial medical trends were just over ten percent for inpatient, middle single digits for professional and in the mid-teens for outpatient and pharmacy for the first quarter of 2003 compared to the first quarter of 2002.
Exhibit 5
OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
MEMBERSHIP DATA
(in Thousands)
(Unaudited)
Total Membership 2003 2002 2001
1Q 4Q 3Q 2Q 1Q 4Q
POS, PPO and Other
Plans 1,276.8 1,252.9 1,249.8 1,236.0 1,204.9 1,154.1
HMO 204.0 226.6 229.0 233.6 236.7 218.2
Total Fully Insured
Commercial
Membership 1,480.8 1,479.5 1,478.8 1,469.6 1,441.6 1,372.3
Medicare 70.7 70.1 69.6 68.9 67.5 77.8
Third-party
Administration 41.1 51.9 62.7 63.3 65.4 60.0
Total Membership 1,592.6 1,601.5 1,611.1 1,601.8 1,574.5 1,510.1
Fully Insured
Commercial Growth 1.3 0.7 9.2 28.0 69.3 5.7
Fully Insured
Commercial Growth % 0.1% 0.0% 0.6% 1.9% 5.0% 0.4%
Membership
Fully insured commercial membership at the end of the first quarter of 2003 was approximately 39,200 members higher than at the end of the first quarter of 2002 and approximately 1,300 members over year-end 2002. Fully insured commercial membership for Oxford increased approximately 14,300 members in the first quarter, while MedSpan membership declined by approximately 13,000 members as the Company continued to rationalize the pricing of the business acquired late in the first quarter of 2002.
SOURCE Oxford Health Plans, Inc.
Web Site: http://www.oxfordhealth.com
Photo Notes:
http://www.newscom.com/cgi-bin/prnh/20001212/OXHPLOGO
Company News On Call: Company News On-Call:
http://www.prnewswire.com/comp/104612.html