Headlines from Latest ‘Health Plan Market Trends Letter’

January 30, 2012
  • WellPoint Shares Sink on 4Q11 Profit Decline
  • Chart: WellPoint Financial Results by Segment
  • Outlook for Managed Care 2012: Steady Profits
  • Chart: Forecast Managed Care Industry % Growth, 2009-12
  • Managed Care M&A: 2011 is a Break-Out Year
  • Chart: Managed Care M&A—Value, Number of Selected Deals, 2003-11

Additional details available here.


Outlook for Managed Care 2012: Steady Profits

January 25, 2012

WellPoint’s poor recent financial results aside, the outlook for the managed care industry in 2012 calls for steady profit growth of about 8%, according to the newly released Outlook for Managed Care, 2012.  Medical cost trends remain muted by the sluggish economy, which means premium rate hikes — though expected to decelerate this year — should cover cost increases, the report says.

While the short-term outlook is solid, the report notes:

Longer-term, however, health plans face broad profit pressures largely tied to healthcare reform.  These include rebates, taxes and participation in low-margin insurance exchanges.  Even without reform, health plans continue to face a variety of structural issues that hamper long-term profit prospects – including deterioration of fully funded membership and the shift toward low-premium high-deductible health plans.  The advent of ACOs also threatens the relevance of health plans by diminishing the industry’s central role in managing risk.

One bright spots is Medicaid, with states turning to managed care plans to control costs and because of expanded eligibility under reform.  Dual eligible are also expected to be an area of membership growth for managed care.  Fully funded commercial membership is expected to be flat to down.

‘We Have a Humongous Health-Care Problem’

January 19, 2012

But we don’t have a “generalized problem of runaway spending…that requires cuts across the board” to fix the federal deficit, according to former Fed vice chairman Alan Blinder, writing in today’s Wall Street Journal

He cites long-term CBO projections that the primacy deficit (which excludes interest payments) will bottom out at 2.6% of GDP in 2018 and then rise to 7.4% by 2040.  The entire increase will come from rising healthcare costs. Notes Blinder:

We have a huge problem of exploding health-care costs, part of which show up in Medicare and Medicaid spending.

Other “deficit myths,” Binder argues, include the notions that Americans are demanding deficit reduction like never before (they’re not, he says) and that the deficit problem is so acute it requires immediate spending cute despite the bad economy (it isn’t, he says).

Headlines from Latest ‘Health Plan Market Trends Letter’

January 17, 2012
  • CVS to Buy Health Net PDP Business for $160 Million
  • Chart: PDP Market Share, Estimated Valuation, 15 Leading Plans
  • Universal American to Acquire APS Healthcare for $227.5 Million
  • Rite Aid Names Barnes Group VP of Managed Care
  • Not-for-Profit Blues Take 3Q11 Profit Hit
  • Chart: Historic Not-for-Profit Blue Profit Margins
  • U.S. Healthcare Expenditures Rise Just 3.8% in 2010; Share of GDP is Flat

Additional details available here.

Recommended Reading: ‘[sic]: A Memoir’

January 5, 2012

Joshua Cody’s [sic]: A Memoir is a poignant account of what it’s like to be dying from cancer, where the treatment is sometimes worse than the disease.

Not-for-Profit Blues Take 3Q11 Profit Hit

January 4, 2012

Research from Citi shows that underwriting margin for non-for-profit Blue Cross Blue Shield plans fell to 2.8% in the third quarter, down 20 basis points from the second quarter.  Citi expects margins to deteriorate further in the fourth quarter.  Still, margins improved through nine months to 3.3%, compared to 3.1% for the same period a year earlier.

The question is what does this say about premium price competition?  Citi notes:

There’s no question premium rate increases will be lower in 2012, in part driven by more aggressive Blue Cross pricing. That said, plans are still pricing above the current cost trend, so provided utilization remains low, margins at the publicly traded plans can still improve in 2012.



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