The Company has implemented increased premium rates across essentially all of its commercial products. As the Company's contracts are generally for a one year period, increased pricing cannot be initiated until a contract reaches its renewal date. Therefore, price increases cannot be made across the Company's membership at the same time. Commercial premium rate increases are expected to continue in 2000 in the range of 7.5% to 8%. Management believes that these rate increases may have the effect of slowing the Company's future membership growth. In addition, management reevaluated premium reimbursement rates with regard to its Medicare and Medicaid programs. Specifically, effective January 1, 1999, the Company withdrew from participation in the Medicare program. In October, 1999, the Company withdrew from participation in the North Carolina and West Virginia Medicaid programs. The Company has decided to withdraw from the Virginia Medicaid Program which contractually is due to expire on June 30, 2000. The Company may effectuate this withdrawal by transferring its membership to a non-affiliated company.
Revenue for the year ended December 31, 1998 increased approximately $76.2 million or 6.9 percent over the year ended December 31, 1997. Revenue for the year ended December 31, 1998 includes $5.7 million related to the sale of certain Company owned real estate no longer required in its operations. Excluding these sales, year-over-year revenue increased 6.4 percent. A two percent increase in net average HMO and indemnity enrollment resulted in an increase of approximately $21.2 million in health premium revenue while a 4.8 percent increase in average monthly premium per enrollee, combined for all products, resulted in a $51.1 million increase in health premium revenue. The increase in HMO and indemnity enrollment is principally due to increases in the Company's commercial membership.
Investment securities, consisting principally of municipal bonds and tax-free bond funds are classified as available-for-sale. These securities are carried at fair market value plus accrued interest and any unrealized gains and losses are reported in other comprehensive income, net of the related tax effect. Gains and losses are reported in earnings when realized. Gains and losses on sales of securities are computed using the specific identification method.
M.D. IPA, OCI, OCCI, OCIPA and MLH maintain reinsurance coverage to provide for reimbursement of claims in excess of certain limits. Reinsurance for health claims generally covers 80% of all hospital costs in excess of a deductible amount per enrollee per year or 90% of the approved per diem or fixed charge per procedure (subject to a $2,000,000 maximum lifetime reinsurance limit per person and no more than $1,000,000 in a given year). The deductible per enrollee is $200,000. Reinsurance for life and accidental death claims generally covers all settlements in excess of $50,000 per person subject to a $950,000 maximum recovery per person for life claims and $1,000,000 per person on accidental death claims. Reinsurance recoveries for the years ended December 31, 1999, 1998 and 1997 were approximately $1,566,000, $1,597,000 and $2,045,000, respectively. In the consolidated statements of operations, reinsurance premiums are shown net of the related recoveries.
On August 26, 1996, the Company established the MAMSI SCT to fund its obligations arising from its various stock compensation plans. MAMSI funded the SCT with 9,130,000 shares of newly issued MAMSI stock. In exchange, the SCT delivered a promissory note to MAMSI for approximately $129.9 million which represents the purchase price of the shares. Amounts owed by the SCT to MAMSI are repaid by cash received by the SCT or will be forgiven by MAMSI, which will result in the SCT releasing shares to satisfy MAMSI obligations for stock compensation.
with MAMSI's underwriting of risk on a specific and/or aggregate stop loss basis. The Medicare product is health coverage offered to Title XVIII Medicare recipients. Under a contractual arrangement with the United States Health Care Financing Administration ("HCFA"), the Company received a monthly premium for which the Company provides comprehensive medical coverage to those individuals. Effective January 1, 1999, the Company no longer participates in the Medicare program. MAMSI offers access to its preferred provider network of physicians to employers and insurance companies in association with various health plans. PPOs allow enrollees to receive care from a network of participating physicians and health care practitioners who agree to provide services at contractually negotiated rates in exchange for increased patient volume. A PPO does not assume insurance risk from medical utilization and it is not the claims payor.
We have audited the accompanying consolidated balance sheets of Mid Atlantic Medical Services, Inc. and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.