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Health Insurers, Are you Prepared for a Rainy Day?

Jeff Elliott, for HealthLeaders Media, November 17, 2010

It's good to be in the healthcare industry.  And lately it's been particularly good to be a health insurer.

Exhibit 1: The country's largest health plans celebrated a strong third quarter led by results from UnitedHealth Group, WellPoint and Aetna, whose profit rose 53 percent, leading company to raise its year-end earnings forecast.

Conditions have been favorable for health plans, which realized an up-tick in investment income in recent months and benefitted from lower medical loss ratios—the portion of revenue spent on medical expenses.

Health plans also appear to be reaping benefits from efforts they began several years ago to encourage members to seek more outpatient care rather than expensive in-patient services, according to Analyst Sophie Snyder of market research firm IBIS World.

"For many services, insurers [have been] reimbursing hospitals at a higher rate for ambulatory care than in-patient care," she said. "The amount they've had to pay out is slightly decreasing and likely having a greater impact than in previous years."

It's too bad that where there are winners, there are also losers. Americans, perhaps for economic or other reasons, are paying fewer visits to the doctor, leading to lower volume, thus revenue, for healthcare providers. Combined with increasingly tight credit markets, a highly competitive environment, and perpetually declining reimbursements, hospitals are having a rough go of it.

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