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High Unemployment Hurting Health Insurers

Joe Cantlupe, for HealthLeaders Media, February 11, 2010

High unemployment in 2009 squeezed private health coverage and enrollment in publicly subsidized managed care plans, according to health insurance ratings agency A.M. Best Co.

In a latest report, commercial enrollment among publicly traded insurers dropped by 2.3% or 2.3 million members through the first nine months of 2009. No overall reversal is expected until employers start hiring, the agency said.

The findings are reflective in recent reports by major insurers, which indicated significant enrollment drops in 2009 compared to 2008. Aetna, UnitedHealth Group Inc, WellPoint, Humana Inc., and CIGNA all have reported enrollment drops. The enrollment losses have been tied to reduced jobs, and a reduced number of people covered by employer-sponsored health insurance.

CIGNA, for instance, reported that medical membership fell 5.5 % to 11 million in the final quarter of 2009, compared to the final quarter of 2008. Enrollment fell less than 1% from the third to fourth quarter of last year, according to the company. Enrollment is expected to range from a 1% loss to a 2% gain in 2010.

WellPoint and UnitedHealth Group also reported enrollment drops that slowed over the final two quarters of 2009 and both said they expect continued losses into 2010. Aetna's fourth-quarter earnings fell 15% as the health insurer stated it continued to feel the effects of inadequate pricing, as well as pressures from the economic downturn.

The A.M. Best report also noted:

  • Medicaid managed-care enrollment and private insurance subsidies for laid-off workers under the economic stimulus legislation increased.
  • Demands on state budgets stemming from the weak economy and the “rising demand” for safety-net insurance are expected to make Medicaid rate increase negotiations difficult.
  • Lower rate increases are expected to continue for Medicare Advantage plans, which saw enrollment wane to 10.4% last year. Insurers paid off debt and fewer took on new debt in the first nine months of 2009.
  • In the health insurance sector, five mergers and acquisitions were reported last year, compared with 17 the prior year.

Joe Cantlupe is a senior editor with HealthLeaders Media Online.
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