I sat through a very interesting talk about American health care yesterday afternoon. I guess I knew all this but it was good to have it laid out in front of me. Here are my notes from the talk about the health insurance market.
The overall number of people with private health insurance has been stagnant (176.9m) since 2000 while the workforce is growing (from 137m in 2000 to 145m in 2006). The number of uninsured is growing as are those in public programs. And as a consequence the “lives” growth in the big for-profit health plans has been below Wall Street expectations. Consumer directed health plans are growing and from around 9–10m lives in 2007 may end up at as many as 25m lives in 2010 (although those projections are much lower than they were a year ago).
Margins are as high as they’ve ever been and are at the top or even higher than the top of the underwriting cycle. Is the underwriting cycle over as they’re saying? Maybe but it’s been around for 50 years, and margins in non-profit Blues (which the speaker said aren’t so concerned about profits as the for-profits, which may be news to some non-profit CEOs I’ve met!) have started to trend down, and overall premium trend is moving down. Furthermore, some competition between plans is causing overall pricing go down (although some of that may be change in product mix, as more HDHPs which have lower premiums are sold).
Then there was a great chart showing that usually medical cost trend goes up with a 3–4 year lag to overall economic growth. We’re at about 3–4 years after the start of the most recent economic expansion now. So should we expect medical trend to go up, while premiums are going (relatively) down, and so in consequence expect the financial health of insurers to be getting worse? (My note: Is that why they’re trying so hard to hang on to those “extra” Medicare Advantage payments?)
Finally, we’re seeing employer’s provision of coverage to their employees go down, unusually, in the middle of a boom (the jobless recovery is not jobless, so much as benefit-less).
What did the speaker think was the likely outcome of all this? Bad news for health plans compounded by national health reform starting in 2009 lead by a Democratic President.
And from which lefty did I crib all this insight? Matt Borsch, health care analyst at that well known group of Bolsheviks called Goldman Sachs.