A new report released today confirms what a lot of people would have guessed: 2008 was not a good year for managed care companies.
Even though eight of the nine managed care companies reviewed in the KPMG Healthcare and Pharmaceutical Institute's 2009 Managed Care Industry Report saw declines in net income in 2008, the report projects some improvements in 2009, despite a poor economy and uncertainty about the impact of federal healthcare reforms.
John Fitzgibbon, KPMG's managed care sector leader and the author of the report, tells HealthLeaders Media that the managed care industry hasn't seen tough times like this since the mid-1990s. However, he says there is no cause for alarm. "As a group they are still pretty solidly profitable. It's just that the level of profitability is lower than it was in 2007. For the four preceding years, there was not only solid profitability but increasing profitability. That trend changed in 2008," he says.
His report notes that the bleak economy, rising numbers of uninsured, and rising medical costs, are among the factors that are negatively impacting the managed care industry and which are largely beyond its control. "The recession promises to be long and deep, the number of jobs continues to decline, the financial system is in disarray, and consumer confidence is low," Fitzgibbon says in the report. "Most healthcare companies are finding that their businesses are less recession-resistant than previously thought, and the future is uncertain. Managed care companies are faced with declining enrollment as unemployment increases and a tough pricing environment. This will undoubtedly be a challenging year financially for managed care companies."
There is also anxiety in the managed care industry about the impact of yet-to-be-crafted healthcare reforms being considered by Congress. Many insurers anticipating that the final product will provide some gains and some losses. "Provisions to increase federal funding of existing healthcare programs and to decrease the number of uninsured Americans should have a positive impact on managed care companies," Fitzgibbon writes. "Provisions to reduce Medicare Advantage premiums and establish government sponsored health plans probably would not."
The report found that:
Despite the bleak times, Fitzgibbon says that industry pricing discipline remains strong, and managed care companies report that the market is "competitive but rational. Competitors are unwilling to sacrifice margin for increased membership."
The nine managed-care companies covered in the report are: Aetna Inc.; AMERIGROUP Corp.; Coventry Health Care, Inc.; Health Net, Inc.; HealthSpring, Inc.; Humana Inc.; Kaiser Foundation Health Plan and Hospitals; UnitedHealth Group Inc.; and WellPoint, Inc. The data used in the report was taken from annual reports, and filings to the SEC and other regulatory agencies, and public sources from 2004 to 2008.