Here’s my FierceHealthcare editorial today. You’ll notice I’m a little more fair and balanced in this one than some of you might expect!
Life has been good–very good–for the stockholders and executives of the nation’s health insurers in the last few years. Many, if not most, health insurers ended the 1990s with red ink all over their income statements after they "bought" market share and fought providers over price. The early 2000s were a period when insurers got back to basics. They assessed risk, mended their fences with providers, and put up prices to their customers. More than that, the industry reduced its medical loss ratio–the share of premium that it passes onto providers–from an average in the 80 percentage points range down to the low 70s. In other words they put up their prices to customers faster than they increased their payments to providers. Then on top of all that they got a large bonus in the 2003 Medicare Modernization Act which increased payments for their Medicare enrollees and gave them a whole group of new customers in Medicare Part D plans.
But of course Wall Street cares little for past glories. This week Aetna reported that medical loss ratios were heading up. Its stock plummeted 20 per cent, dragging the sector as a whole down with it. Meanwhile compensation controversies dog UnitedHealth Group, and WellPoint stands accused of cancelling members contracts illegally. And of course employers are in general very unhappy with what they’re paying for health care. Private health insurers need to concentrate on proving where they add value to the system, or their future environment may be less friendly than that which they’ve been enjoying recently.