The Price of For-Profit Insurance

June 13, 2014

Austin Frakt of The Incidental Economist highlights a study that suggests:

Sizeable [for-profit] insurers are more likely to exercise market power via price increases than are comparable NFP [not-for-profit] insurers. Second, pricing actions by dominant insurers have a ripple effect on rivals’ prices, further solidifying the evidence pointing towards oligopolistic conduct in many local insurance markets.


Hospital-Owned Health Plans Redux

May 27, 2014

The trend toward provider-owned health plans is making a comeback – and so are all the questions surrounding the wisdom of this type of marriage.  Austin Frakt of The Incidental Economist studied the issue and found:

Insurance plans offered by hospitals charge higher premiums. We also found that such plans are rated to have higher quality by consumers — but that about 70 percent of the additional premium was not attributable to higher quality. We found no evidence that integration is associated with more generous health plan benefits.


Health Plan Profits to Nosedive in 2014, but the Future is Still Bright

January 14, 2014

Health insurance industry profits are projected to fall about 5% to 6% in 2014, hammered by taxes associated with healthcare reform, Medicare Advantage reimbursement cuts, margin pressures in certain commercial lines, and slower than expected exchange implementation, according our soon-to-be-released Outlook for Managed Care 2014.

But the decline in 2014 profits isn’t the whole story.  Profit growth will begin to normalize in 2015 and beyond.  By then, plans will have digested the initial hits to margins in both the government and individual lines.  They will also start to benefit from expanded enrollment in Medicaid, Medicare and individual.

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TN Medicaid Awards Expected Monday

December 13, 2013

Citi on the Tennessee managed Medicaid rebid–a contract serving 1.2 million members and split between Blue Cross Blue Shield of Tennessee, UnitedHealth and WellPoint:

Medicaid re-bids usually have far more risk than reward for the managed care stocks, but that’s not the case here — If United or WellPoint were to lose the Tennessee business, the impact on either stock would likely be immaterial, whereas a win for Centene, Molina, or WellCare would have significant implications, as the state could ultimately be worth more than $1.7 billion in revenue. As a very short-term trade, it makes sense to own a basket of these three stocks into Monday’s announcement, since a successful bid could ultimately add $0.60-0.75 per share in earnings (12-25%), assuming pre-tax margins ultimately reach 3%.

Update: Looks like the three incumbents will hold onto  the contract.


Is this the Future for Health Plans?

December 3, 2013

Industry bellwether UnitedHealth Group projects 2014 health plan profits to fall about 15% in 2014 while earnings from the company’s Optum healthcare technology and services division soar.  Is this the future for health plans as reform takes a big bite out of industry profits?  Not so fast.  United says that after the initial hit from reform cycles through, health plan profits will accelerate through 2018 and could double over the next seven to 10 years.

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Net Margin Flat at 4.3% through 6 Months 2013 for 21 Top Not-for-Profit Health Plans

November 18, 2013

Our latest tally of state insurance filings indicates that 21 leading not-for-profit health plans had a net margin of 4.3% through six months of 2013, unchanged from the same period a year earlier.  For the full year 2012, net margin at the 21 companies was 3.9%.  Complete details appear in the Nov. 11 issue of Health Plan Market Trends.


WellCare “Not Actively Pursuing” a Sale

November 8, 2013

Chairman and interim chief executive David Gallitano on the company’s third-quarter earnings call, after announcing the firing of company head Alec Cunningham:

The Board has an obligation, obviously, to always be open to interested parties. There are no active discussions, and I don’t see any potential active discussions at this point in time. But we are certainly not actively pursuing it either. We think the prospects for this company are very strong, and we see a great runway for WellCare, to be candid.


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