Managed Care - June 2008 - (Page 25)

Diversity Relieves the Pain rising medical costs and miscalculations in pricing health-plan premiums would lead to lower-thanexpected profits this year. Both WellPoint and UnitedHealth, the secondbiggest insurer, have seen recent declines in the number of people they insure. In a statement to market analysts, WellPoint chief executive Angela Braly said one reason was that small businesses are dropping or significantly cutting back coverage. were climbing. This time, however, a weak economy is exacerbating a longer term and more troublesome trend: For employers and workers, health insurance seems to have become too expensive. “What we’re seeing is a market that’s gotten so mature and beyond its customer that people can no longer afford to buy the product,” Sheryl Skolnick, an analyst with CRT Capital Group, told the Wall Street Journal at the end of the first quarter of 2008. “The number of uninsured is growing faster than any player in the game, and it’s getting bigger at the No longer recession-proof expense of the Uniteds, the WellPoints.” Ironically, economic woes had little effect on “Health insurance is increasingly expensive,” says health-insurance profits during the past two recesHenry J. Aaron, PhD, a senior fellow at the Brooksions. Both came at a time — the early 1990s and ings Institute. “But what’s also affecting the market at the beginning of the current decade — when inis a growing consensus among analysts that potensurers were able to make robust profits by raising tially ruinous deficits are about to happen. They see prices much faster than underlying health costs that the baby boom generation is about to start retiring, Managed care stocks ride roller coaster making it necessary to eliminate or at least sharply reduce 2,400 publicly funded coverage of Stock prices for some of the biggest the elderly and people sufferinsurers fell precipitously earlier this year, ing from chronic conditions, 2,200 though they began making a modest comeback last month. Size alone does not and they project that this will comfort investors. Diversification does. adversely affect the private sector.” 2,000 Underlying Aaron’s point is the assumption that the public and private health care sec1,800 tor are inexorably linked. It frightens investors when they realize that increases in public 1,600 health spending are often Morgan Stanley matched by increases in priHealth Care Payor Index vate spending. “Slowing the June 2006–May 2008 1,400 growth of public-sector health care spending without reining in private-sector health care 1,200 spending is impossible,” says Aaron. Increased payments to pro1,000 viders result in increased preJ J A S ONDJ FMAM J J A S ONDJ FMAM miums, which cause employ2006 2007 2008 ers to drop coverage, which lowers profits, which drops JUNE 2008 / MANAGED CARE 25

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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