Although the health insurance mandate will bring up to 32 million new customers, primarily to the individual market, the employer-sponsored health insurance system continues to grow and remains the source of many Americans' coverage. As long as companies are laying off workers or waiting to resume hiring, insurers should be concerned.
So what's an insurer to do when faced with the dual challenges of a bad economy and industry overhaul? If they can't expand membership organically, more may look to do so through mergers and acquisitions, the report predicts. As I wrote in a previous column, the industry has been consolidating for a while, and may face even more pressure to do so in the near future.
While a lot of insurers are still going to be profitable, they may have to pay a lot more attention to overhead and efficiency to make it happen. The KPMG report even predicts job cuts at some insurers struggling to reign in administrative expenses. And that's certainly not going to help the unemployment rate, which is causing the problem in the first place.