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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A NO. 1
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________to_____________
Commission File Number: 0-19442
OXFORD HEALTH PLANS, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1118515
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
800 Connecticut Avenue, Norwalk, Connecticut 06854
(Address of principal executive offices) (Zip Code)
(203) 852-1442
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. The number of shares of common
stock, par value $.01 per share, outstanding on May 4, 1999 was 81,086,308.
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The three months ended March 31, 1999 compared with the three months ended March
31, 1998
Total revenues for the quarter ended March 31, 1999 were $1.03 billion, down
15.4% from $1.21 billion during the same period in the prior year. Net earnings
attributable to common stock for the first quarter of 1999 totaled $3.2 million,
or four cents per share, compared to a net loss of $45.3 million, or 57 cents
per share, for the first quarter of 1998. Results of operations for the first
quarter of 1998 were adversely affected by significantly higher medical costs
and approximately $25.0 million ($16.3 million after tax, or 20 cents per share)
of charges for severance and other costs expected to be incurred in connection
with the restructuring of certain administrative and management functions.
Membership in the Company's fully insured commercial health care programs as
of March 31, 1999 decreased by approximately 149,000 members (9%) from the level
of such membership as of March 31, 1998 and by 46,500 members (3%) since
year-end 1998. The decline since year-end 1998 is due to reductions in members
in noncore states and in the Company's core commercial markets. Membership in
government programs decreased by approximately 240,000 members (69%) compared to
March 31, 1998, reflecting the exit of the Company from the Medicaid market in
total and from the withdrawal or restructuring of the Medicare business in
several markets.
Total commercial premiums earned for the three months ended March 31, 1999
decreased 5% to $829.4 million compared with $872.6 million in the same period
in the prior year. This decrease is attributable to a 7.9% decrease in member
months in the Company's commercial health care programs, partially offset by a
3.2% increase in average premium yield. Average premium yields for the full year
1999 are expected to be about 9% higher in the Company's core commercial
business than in the prior year.
Premiums earned from Medicare programs decreased 28% to $187.0 million in
the first quarter of 1999 from $260.9 million in the first quarter of 1998.
Membership declines accounted for all of the change as member months of Medicare
programs decreased 33% when compared with the prior year first quarter, while
average premium yields of Medicare programs increased 7.3% over the level of the
prior year first quarter. This yield increase exceeded the average rate increase
granted by the Health Care Financing Administration ("HCFA") as membership
losses occurred primarily in lower reimbursement counties. Premiums earned from
Medicaid programs decreased 87% to $10.2 million in the first quarter of 1999
compared with $79.6 million in the first quarter on 1998. The decline reflects
the Company's total withdrawal from the Medicaid market by the end of January
1999.
Investment and other income, net includes a $13.5 million gain on the sale
of the Company's New York Medicaid business in the first quarter of 1999. In
addition, net investment income for the three months ended March 31, 1999
increased 45% to $16.2 million from $11.1 million for the same period last year.
The improvement is primarily due to an increase in average invested balances in
the first quarter of 1999 compared with the first quarter of 1998 offset, in
part, by a $1.9 million decline in capital gains realized in the first quarter
of 1999 compared with the prior year quarter. The higher invested balances are
attributable to the funds received in the Company's May 1998 financing
transaction.
The Company incurred interest and other financing charges of $10.1 million
in the first three months of 1999 related to its outstanding debt and capital
lease obligations, compared with $3.6 million in the first three months of 1998.
The increase is primarily attributable to the issuance of $350 million of
long-term debt in May 1998 at which time bridge financing notes of $200 million
were redeemed. Interest expense on delayed claims totaled $3.9 million in the
first three months of 1999, compared with $3.2 million in the first three months
of 1998. Interest payments have been made in accordance with the Company's
interest payment policy and applicable law. The Company's future results will
continue to reflect interest payments by the Company on delayed claims as well
as interest expense on outstanding indebtedness.
The Company had income tax expense of $10.3 million for the first quarter of
1999 reflecting an effective tax rate of 42%. The Company has established a tax
valuation allowance related to certain net operating losses and the effect of
the Company's net tax deductible temporary differences. The Company has not
changed its view that such tax benefits relating to losses incurred subsequent
to the first quarter of 1998 are more likely than not to be realized in the
foreseeable future. However, the Company may re-
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examine its position as further results of operations become available in 1999.
The Company discontinued providing tax benefits beginning in the second quarter
of 1998. Based on the Company's assessment of the progress to date of the
Turnaround Plan, together with projections of future performance, the Company
currently believes that it is more likely than not that deferred tax benefits
recorded prior to April 1998 will be realized. The Company will continue to
monitor its tax position throughout the implementation of its Turnaround Plan to
determine whether such deferred tax benefits will require an additional
valuation allowance or adjustment. The amounts of future taxable income
necessary during the carryforward period to utilize the unreserved net deferred
tax assets is approximately $300 million.
The medical loss ratio (health care services expense stated as a percentage
of premium revenues) was 84.9% for the first quarter of 1999 compared with 87.9%
for the first quarter of 1998. The improvement in the first quarter of 1999
reflects a 2.5% increase in average overall premium yield and a 1.0% decrease in
per member per month medical costs when compared to the prior year first
quarter, the latter as a result of a significant change in the Company's
membership composition (for example, a reduction in the number of members in
government programs) and initiatives to control health care costs and reduce
inappropriate utilization of services. The Company believes it has made adequate
provision for medical costs as of March 31, 1999. There can be no assurance that
additional reserve additions will not be necessary as the Company continues to
review and reconcile delayed claims and claims paid or denied in error.
Additions to reserves could also result as a consequence of regulatory
examinations and such additions would also be included in the results of
operations for the period in which such adjustments are made.
Marketing, general and administrative expenses totaled $149.7 million in the
first quarter of 1999 compared with $201.0 million in the first quarter of 1998.
The decrease when compared to the first quarter of 1998 is primarily
attributable to a $21.0 million decrease in payroll and benefits due to reduced
staffing and a $14.2 million decrease in consulting fees as the prior year
quarter reflects significant expenses related to enhancements to management
information systems. These expenses as a percent of operating revenue were 14.5%
during the first quarter of 1999 compared with 16.5% during the first quarter of
1998 and 16.7% for the full year 1998. Administrative costs in future periods
may be adversely affected by incremental costs incurred in an initiative to
improve service levels and costs associated with responding to regulatory
inquiries and investigations and defending pending litigation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OXFORD HEALTH PLANS, INC.
(REGISTRANT)
May 24, 1999 /s/ NORMAN C. PAYSON, M.D.
Date NORMAN C. PAYSON, M.D.,
CHIEF EXECUTIVE OFFICER
May 24, 1999 /s/ YON Y. JORDEN
Date YON Y. JORDEN,
CHIEF FINANCIAL OFFICER
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