Managed Care - June 2008 - (Page 30)

But analysts say that size alone does not give real comfort to investors. What is required is diversification. “Product diversification is a critical factor in long-term survival for these companies,” says Aaron. A study of the current market by John Holahan of the Health Policy Center at the Urban Institute points to increasing complexity. What is noteworthy, according to Holahan, is the decline in employer coverage — a drop of about 4 percent since 2000. That translates into nearly 4 million more uninsured people — a factor generally accepted by policy analysts to increase overall health care costs. And increased costs mean increased market volatility. In an article titled “The U.S. Economy and Changes in Health Insurance Coverage, 2000–2006” published in the January/February Web edition of Health Affairs, Urban Institute researchers reported that “the decline in employer coverage can be traced to broader changes in employment and population migration. It is striking that the rate of employer coverage declined and the number of uninsured people increased even after the U. S. economy rebounded from the recent recession [in 2000]. This erosion will likely continue . . . because the basic factors underlying it seem unlikely to change.” Says Holahan about the Urban Institute study: “These factors affect the perception of investors of the strength of the private sector. Plans get their income by providing service. The way plans provide service has to adjust to market demands.” Health insurers have been cushioning problems by expanding into new areas, such as offering plans to Medicare beneficiaries and developing health information tools and capabilities that might help employers and individuals better control their own costs. “That is what the market, even a weak market, achieves,” says Ghose. “It provides incentives for insurers to develop innovative products.” UnitedHealth, for example, has been diversifying beyond traditional insurance. It is active in administering the Medicare drug benefit, and it sells Medicare fee-for-service plans. It has also launched a division for health care information research. According to some analysts, Aetna’s medical cost and disease management tools are one reason it hasn’t experienced the drop in enrollment suffered by most of its competitors. In 2007 among the top four carriers — WellPoint, UnitedHealth, Aetna, and Cigna — Aetna was the only one that didn’t see a decline in the number of premium-paying en- rollees, according to The Wall Street Journal. Aetna recently announced it had secured the business of Bank of America. Among the relatively new products Aetna is offering are plans geared to students and retirees. “We’ve also developed integrated suites of products, that include dental and behavioral health, highly tailored to the needs of individual clients,” says Laberge. “We’re also seeing an increased demand for administrative service contracts. Diversifying our offerings is how we’ve maintained our revenue stream.” Self-insured employers pay insurers a flat, permember administration fee. These fees are less profitable than traditional full-risk plans, according to analysts, but — as Laberge points out — it’s the proven ability to diversify and meet market demands that helps keep investors happy. Whatever payers want One good example of diversification is the highdeductible plans now being offered by national companies. According to a recent survey by AHIP, as of Jan. 1, 2008, about 6.1 million people were covered by what the trade group calls health savings account/high-deductible health plans (HSA/ HDHP). That is an increase of 1.6 million since January 2007, 2.9 million since January 2006, and 5.1 million since March 2005. “Increased patient cost sharing through higher deductibles, coinsurance, and copayments has helped restrain spending trends since early in the decade,” says Ginsburg. “Creation of such products meets market needs.” “The proliferation of these products is a good example of diversification in response to market pressure,” adds Ghose. But he points to a potential problem facing health plans as they seek to diversify: state mandates on coverage. “Plans will function in a socially responsible manner, and will create the products that purchasers want. That is how they gain market share and investor confidence. It is how the market works most successfully,” says Ghose. Investors rely on insurers to respond creatively to today’s market demands. To instill confidence, they do expect insurers to adjust to the problems they face. “Whether plans can continue to adjust to a changing market remains an open question,” says Ginsburg. “Those who do will survive. Those who fail to adjust fail to survive.” MC 30 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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