Two years later, no company fills void created by Premier Medicare HMO collapse

More than two years ago, a health insurance company that provided a health maintenance organization for Medicare recipients in rural Arizona collapsed.

Since then, no company has emerged to take the place of Premier Healthcare of Arizona Inc.

The demise of Premier left about 20,000 seniors, including an estimated 3,400 to 3,500 Kingman-area residents, without a Medicare HMO effective Jan.

1, 2000.

Premier also provided medical coverage to non-seniors, and courted a contract to provide health care to Mohave County government.

The company had more than 70,000 enrollees throughout Arizona, primarily in Kingman, Flagstaff, Prescott and Yuma, according to the state Department of Insurance.

"The HMOs are pulling out of rural areas," said Erin Klug, a public information officer with the department.

"I think, generally speaking, it has to do with their ability to contract with providers and develop a provider network."

John Gilbert, a registered health underwriter who lives in Kingman, agrees.

"We still don't really have an HMO available in Mohave County because of the reimbursement that is being made by Medicare is not keeping up with the rise of what HMOs are having the pay for medical care," he said.

"And we are still losing HMOs not just in this county but (in) all areas.

The most vulnerable areas are rural areas."

Officials from the federal Health Care Financing Administration, which administers Medicare, could not be reached for comment.

Seniors who could afford to signed up for various Medigap supplemental plans, but only three – H, I and J - provide a prescription drug benefit that Premier offered, according to Gilbert.

Seniors who could not afford supplemental plans reverted to Medicare's traditional fee-for-service plan, known as parts A (hospitalization) and B (doctor visits and other medical costs).

The traditional plan costs seniors a deductible of $792 (rising to $812 Jan.

1) for each hospital admission separated by two months or longer and $100 a year for medical expenses, Gilbert said.

Medicare then pays 80 percent of what Medicare approves.

Medicare recipients who subscribed to Premier by having their monthly Part B payments deducted from their Social Security checks faced premiums for the first time effective Jan.

1, 2000.

Faced with reduced reimbursements from the federal government, Premier notified its customers in a letter dated Oct.

25, 1999, that they would be charged $55 per month.

However, Premier fell behind in its payments to doctors and hospitals.

The company owed as much as $11.5 million to hospitals and operated nearly $4 million in the red, according to the Department of Insurance.

The insurance department obtained a court order on Nov.

16, 1999, in which it placed its director, Charles R.

Cohen, as a receiver of Premier.

Premier agreed that it was legally insolvent and consented to the appointment of the receiver, according to a press release issued that day by the department.

The press release stated that Premier's contract with HCFA would end Nov.

30, 1999.

HCFA officials conducted a meeting Nov.

18 that drew more than 225 seniors to the Kathryn Heidenreich Adult Center in Kingman.

They attempted to assure seniors that they would have health care coverage in light of the impending demise of Premier, the only Medicare HMO in Mohave County.

Into the HMO void went Gilbert, who moved from Orange County, Calif., to Kingman to retire.

He volunteered 40 to 60 hours a week at the Heidenreich center in which he counseled Premier recipients about their options, such as paying extra for supplemental plans.

"Unless you are really broke, it is pretty important" to obtain supplemental plans, Gilbert said.

Gilbert, 80, estimated 75 percent of all medical expenses come after the age of 65, the age when people qualify for Medicare benefits.

Meanwhile, state lawmakers continue to wrestle with resolving the plight of seniors who lost their HMO coverage with Premier's collapse.

"We're trying to come up with a plan that will bridge the gap for the seniors and also give the small businesses and their employees some coverage," said District 2 Sen.

John Verkamp, R-Flagstaff.

"What we are trying to do is revamp the whole state system for providing health care.

It's not just working in the outlying areas.

It is far too expensive.

People are having to pay more for their health care premiums than they are for their (monthly) house payments."

Verkamp and District 2 state Rep.

Tom O'Halleran, R-Oak Creek, serve on a Senate/House task force on health care.

O'Halleran said he expects legislation on affordable health care to be introduced next year, but sounded pessimistic.

His colleague in District 2, Rep.

Jim Sedillo, D-Flagstaff, could not be reached for comment.