Principal Financial to Exit Health Insurance Business

September 30, 2010

Principal Financial Group is exiting the health insurance business.  Why?  The business is changing, requires investment, and is a shrinking component of the company’s overall portfolio.  While only partly about reform, the decision highlights the strategic dilemma facing marginal players.  Expect more of this kind of thing in the months ahead.

Principal agreed to allow UnitedHealth to act as the incumbent when accounts come up for renewal over the next 36 months. United will pay Principal an undisclosed amount based on the number of lives renewed.  The exit doesn’t impact Principal’s wellness, vision or dental lines.

Principal had about 381,000 fully funded group health members as of year-end 2009 and 615,000 ASO lives (health, dental, vision and disability).  But health insurance membership was declining in 2010 along with revenues and operating earnings.  Premiums and fees fell 15% to $705 million through six months of 2010, while health insurance accounted for just 15% of total company revenues.  Principal’s health plan membership spanned 31 states, but was concentrated in the central U.S.


Health Plan Enrollment Data Dump

September 29, 2010

This week’s issue of Health Plan Market Trends Letter is a data dump of enrollment figures for major health plans – all of which reinforces familiar trends.  Fully funded enrollment continues to fall.  Self-insured enrollment continues to rise.  Medicaid and HSA-compatible high-deductible health plans are enjoying gains.


Medco Margin Trends

September 28, 2010

Here’s an interesting analysis from The Motley Fool on margin trends at pharmacy benefit manager Medco Health Solutions (Note: TTM = trailing 12 months):

  • Over the past five years, gross margin peaked at 7.3% and averaged 6.3%. Operating margin peaked at 3.9% and averaged 3.4%. Net margin peaked at 2.2% and averaged 1.9%.
  • TTM gross margin is 6.6%, 30 basis points better than the five-year average. TTM operating margin is 3.8%, 40 basis points better than the five-year average. TTM net margin is 2.2%, 30 basis points better than the five-year average.

The Fool’s conclusion: Medco “looks like it is doing fine.”  Still shares in the company are down about 20% this year, in part because profits per prescription — a key metric — have disappointed investors.  Shares in leading competitors have done better, with CVS Caremark down about 1% for the year and Express-Scripts up about 14%.


A Drug Shortage I Can Live With

September 28, 2010

From the Associated Press:

Some executions in the U.S. have been put on hold because of a shortage of one of the drugs used in lethal injections from coast to coast.


Quote of the Day: Kaiser Family Foundation

September 27, 2010

The Kaiser Family Foundation has released its September health tracking poll, which finds that 49% of Americans have a favorable view of healthcare reform, up 400 basis points from August.  About 45% have an unfavorable view.  The poll also finds that 53% of Americans are confused about the law, up 800 basis points.  Still, it’s unclear what impact healthcare reform will have on the November midterm elections.  Notes Kaiser:

When it comes to voter turnout and vote choice, the September tracking survey suggests that, at least at this point, health reform is not playing a major role or providing a decisive advantage to one party’s position over the other.


Health Dialog Study Touts Care Management Savings

September 24, 2010

A Health Dialog study of 174,120 patients found that care management instructions delivered by health coaches over the phone help reduce medical costs and hospital admissions.  The idea was that a targeted program that identified more members for support than typical programs would reduce medical costs.  Subjects were randomly split into two groups — one of which received the enhanced support.

At baseline, medical costs and resource utilization were similar in the two groups.  After 12 months, 10.4% of the enhanced-support group and 3.7% of the usual-support group received the telephone intervention.  The average monthly medical and pharmacy costs per person in the enhanced-support group were 3.6% ($7.96) lower than those in the usual-support group ($213.82 vs. $331.78; P=0.05); a 10.1% reduction in annual hospital admissions (P<0.001) accounted for the majority of savings.  The cost of this intervention program was less than $2.00 per person per month.

I’m a big believer in care management programs.  But I’m skeptical any time a care management vendor like Health Dialog releases return-on-investment figures touting the value of its products and services — even when the study is published in the prestigious New England Journal of Medicine.  I always feel like, “What am I missing?”  That’s especially true given that studies from third parties suggest little meaningful ROI for care management programs.

Lead author David Wennberg, M.D. — who is Health Dialog’s chief science and products officer and the son of Dartmouth’s Jack Wennberg , M.D — lists  some key differences between this study and ones that failed: 1. For this study, Health Dialog used an opt-out model.  “By avoiding a long recruitment process, we could simultaneously engage subjects and intervene while achieving a very low refusal rate;”  2. Health Dialog also used real-time administrative feeds (e.g., discharge notifications, “which are issued at a time when patients are particularly receptive to coaching”), which Wennberg says allowed the type of dynamic targeting of members not available in many prior studies; 3. Wennberg also says a  flexible, total population approach allowed Health Dialog to reduce investment in support not likely to yield results (e.g., support for patients too sick or too well for telephone coaching to be meaningful).

This is a study that will be talked about for some time.  The results are impressive.  Let’s hope they hold up under scrutiny.


Health Plan Rebates Point to State Diligence on Rates, Boorady Says

September 23, 2010

Blue Cross Blue Shield of North Carolina agreed this week to refund $155.8 million to 325,000 individual plan members, reflecting reserves for policies that will no longer exist after the introduction of insurance exchanges in 2014.  WellPoint agreed last week to pay $20 million in rebates to 90,000 individuals in Colorado following a state review of premium rate hikes.  Notes Charles Boorady of Credit-Suisse:

While for unrelated reasons, rebates reflect increased diligence by states on rates. However, at the same time, states are pushing the White House to delay minimum MLR implementation, and we believe such delay would more than offset the impact of pricing push-back and rebates.


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