The following table sets forth certain information as of December 31, 2001, relating to the Company's principal facilities:
Premiums Earned. Premiums earned increased $20.6 million to $96.8 million in 2001 from $76.2 million in 2000, an increase of 27.0%. The increase in premiums earned was primarily a result of having FirstChoice's Medicaid line of business in Connecticut for a full twelve months, which contributed an increase of approximately $29.6 million of additional premiums and an increase in WCNY's Child Health Plus and Medicaid premiums of approximately $1.6 million and $1.2 million, respectively, over prior year. Additionally, the Company experienced decreases from its commercial line of business in Connecticut of approximately $8.2 million as the Company continues a strategy of not marketing this product line. WCNY's Medicare premiums decreased approximately $3.6 million, as the Company is also not marketing this product line.
Well Care Development, Inc. ("WCD") was a wholly owned subsidiary formed to acquire, own and develop real estate. WCD was rendered inactive as of June 1999 and was subsequently dissolved in October 2000.
Stock-Based Compensation - As permitted by Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has elected to recognize stock-based compensation under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and to disclose in the notes to consolidated financial statements the effects of SFAS No. 123 as if its fair value recognition provisions were adopted. See Note 8.
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which is effective January 1, 2002. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the identification of reporting units for purposes of assessing potential future impairments of goodwill. SFAS 142 also requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company does not believe that the adoption of SFAS 142 will have an impact on its financial position and results of operations.
The Company has entered into various lease agreements for office space. As part of the management agreement, CHM makes payments to the lessors on behalf of the Company. The payments for leased space are an integral part of the management fee, and lease payments made by CHM to lessors amounted to approximately $368,000, $619,000 and $332,000 during 2001, 2000 and 1999, respectively.
The Risk-Based Capital ("RBC") requirements for health maintenance organizations have not been adopted by the New York legislature. However, the SNYID does require that a RBC report be filed with the SNYID for informational purposes by April 1 of each year. WCNY filed a RBC report as of December 31, 2000 on March 31, 2001. This report disclosed that WCNY did not meet the minimum RBC requirements and triggered a mandatory control level ("MCL") event, as defined in the National Association of Insurance Commissioners ("NAIC") model law for RBC. An MCL event occurred since the WCNY's total adjusted capital was below the mandatory control level. The SNYID may take regulatory action against WCNY as a result of filing this RBC report, including but not limited to placing the Company under regulatory control. As of March 15, 2001, the SNYID has not taken any action.