may be yet to come. The second-tier managed care company has positioned itself well for the future, diversifying away from its traditional small group HMO plans in secondary and tertiary markets into a mix of governmental, ASO, individual, and workers comp managed care services.
The strategy makes sense.
Coventry prides itself on achieving best-in-market margins on health plan operations, choosing to seek margin first and revenue growth second. That is reflected in a tight focus on managing the medical loss ratio (MLR), although that ‘management’ appears to emphasize financial rather than medical management – the MLR strategy is driven much more by increasing premiums ahead of medical inflation than by actually ‘managing’ medical care and costs.
This will serve the company well over the near term, but the ‘MLR management approach’ has to change over the longer term.
CEO Dale Wolf noted that Coventry has gained valuable experience in the individual market, partly as another diversification tactic and partly for long-term, strategic reasons. With health care reform increasingly likely, Coventry (and every health plan) will have to thoroughly understand the individual market – that’s where a lot of growth will occur if and when some form of universal coverage comes about.
While Coventry knows a lot more today about how to sell into this market, it appears to be behind the curve when it comes to actually managing medical care and cost. If universal coverage is part of reform, health plans will find themselves competing not on underwriting but on their ability to deliver lower health care costs over the long term.
The good news is few of the company’s competitors are doing much in the way of real medical management (Aetna is an exception, but operates in a very different market).
What does this mean for you?
Health plans are invested heavily in improving their ability to underwrite and manage expense financially. If universal coverage is part of reform (my bet is it will be) the successful plans will be the ones who learn the mostest the fastest about medical management.
