HEALTH PLANS: It’s blood on the streets today; but is the ride over?

Here’s the news from my FierceHealthcare newsletter on insurers’ stock prices today

Today’s earnings announcements from health plans and insurers don’t look too bad. WellPoint reported a 20 percent surge in profits yesterday, a gain that the company attributes to an increase in membership and decreased medical costs. Aetna also posted good earnings, with first quarter profits up 3.2 percent, but reported a first quarter medical cost ratio of 79.4 percent in its main commercial business. That was up from 77.9 percent a year earlier. Meanwhile, PBM Express Scripts had first quarter earnings of $104.7 million compared with $85.3 million for the same period a year ago.

Wall Street wasn’t having any of it. Aetna’s stock was down over 20 percent today as the company’s CEO Jack Rowe hands over the reins to Ron Williams and CFO Alan Bennett makes plans to retire in 2007. Express Scripts stock is down nearly 10 percent, and the rest of the health plan and PBM sector is down heavily too.

– read the article about WellPoint from the Los Angeles Times– see this Houston Chronicle article about Aetna’s stock slide – read this article from MarketWatch for more about Express Scripts

So is this finally it?  Have the plans been found out? Will we see MLRs head back into the mid-80 percents?  Should we all have shorted UNH and AET in January. Well I myself have believed that health plans have been overvalued forever….but if I’d gone short when I started saying that a few years back (like in this April 2004 column), I’d be living in a cardboard box under a freeway now. Look at what’s happened to their stock since then (the bottom orangel line is the S&P 500). Even with their recent declines they’re all up at least 50% since then and Humana is close to being up 200%:



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