Managed Care - June 2008 - (Page 24)

During Economic Downturn, Recovering from a kick in the gut from investors in the first quarter of 2008, plans are now looking for ways to adjust to a drop in employer-based coverage By Martin Sipkoff Contributing Editor nies involved in the business of managing health care dollars, including health maintenance organizations and pharmacy benefit managers. The significant drop in market value in just one quarter happened for a number of reasons, say economists. Says Paul B. Ginsburg, PhD, president of the Center for Studying Health System Change, “The health care market, including insurers, is not exempt from society’s volatility.” Several factors affect investor confidence, Ginsburg and others say. The two biggest in the health sector are a decline in employer-based coverage over the last few years and the movement by an increasing number of midsize to large (more than 5,000 workers) employers to self-insured products. Other factors include: he industrialist Henry J. Kaiser said that trouble is only opportunity in work clothes. Today’s managed care executives would seem to agree. They’ve seen their stock value roiled in the past few months, but within the turbulence lies opportunity. “Depending on where this economy is going, insurers have the ability to change to meet the needs of the culture, and that is what they are doing,” says Mohit Ghose, until recently the senior vice president for public affairs at America’s Health Insurance Plans and now vice president for public affairs at Aetna. “There is opportunity in such times in developing new products and meeting social responsi• Cost concerns reflecting reports about bilities.” public obesity, the rise in chronic disease If he’s right, Ghose’s new employer may rates, and an aging population (increased be a good example. Aetna appears to be medical costs and rate hikes ranged from 6 doing relatively well today in earnings per percent to 8 percent for large insurers in share (EPS). “It is because of diversificaAnalysts worry 2007, a trend that had been expected to contion,” says Fred Laberge, corporate spokesabout potentially man. “Stock prices are falling for the entire ruinous deficits, says tinue into 2008, according to analysts). industry, but we’re a bit of an outlier. Our Henry J. Aaron, PhD, • A rise in unemployment that results in loss of insurance coverage. strategy has been focused on segmentation. of the Brookings Institute. He says that • The possibility of increased competition We’ve identified underserved markets and publicly funded cov- among plans for market share, although so moved to meet that need.” erage of the elderly far the industry has successfully resisted a Several national health insurers were might be reduced. price war. seeing some light toward the end of May, • An increase in restrictions on and fraud as some of their value began to reemerge investigations related to managed Medicare after a steep first-quarter plunge. But that brighter plans. light lies at the end of what remains a rather long • An overall bearish stock market (about 75 tunnel. percent of all stocks change value on any sinAs of May 27, the Morgan Stanley Healthcare gle day, and the market has been particularly Payor Index experienced a 52-week range of a volatile in recent months). 2,218.56 high (in mid-January of this year) to a 1,341.06 low (at the end of April) — a 40 percent All of this rocks investor confidence. In April, drop in stock value in just one quarter. On May 27, WellPoint, the country’s biggest insurer, set off the the index had risen to 1,554.12. It is designed to sector’s worst selloff in a decade after warning that measure the stock market performance of compa- T 24 MANAGED CARE / JUNE 2008

Table of Contents Feed for the Digital Edition of Managed Care - June 2008

Managed Care - June 2008 Editor’s Memo Contents Viewpoint Letters News and Commentary Legislation & Regulation Medication Management Compensation Monitor Plans Chart Course in Rough Waters A Conversation With Barbara Starfield, MD Smoke Signals from Payers Slow Going for Clinical Decision Support Back Pain and Physical Therapy Formulary Files PlanWatch Outlook

Managed Care - June 2008

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