So yesterday the NY Times has an article suggesting that the good times are over for health insurers. In the last five years they’ve seen huge growth and profits while they’ve retreated from active care management and trying to push provider prices down and instead have returned to their roots as underwriting, financial machines that simply pass on the costs of the system to their clients (i.e. us). Well that’s not exactly what the article says they’ve been doing, but it is what they have been doing. I tend to agree with the NY Times, as I don’t think that the profit growth of the Uniteds and Aetnas is sustainable over the next few years. However, no one bothered to mention this to Wellpoint which this morning announced earnings that blew the doors off expectations and sent the Wellpoint stock price up 6%.

And of course the way the health care business works — remember that 85% of the costs are with 15% of the people — even if your overall enrollment isn’t going up very fast, you just need to get better at avoiding a few expensive enrollees to be very profitable. If you can figure out some way to at least start to manage the care of the sick people you do enroll better — and to be fair Sam Nussbaum at Wellpoint does seem to be trying to do this with diabetics — then you may still make some decent profits so long as you get your pricing right. So there’s your reason why shorting Wellpoint may be a bad, even if very tempting, idea. It of course may not be enough to stop me from being stupid and doing it anyway.