The stock prices of health insurers wax and wane with the likelihood of health reform becoming reality – although in inverse. The announcement last month that the outlook for most of the major health insurers had been downgraded to (or remained) negative might be seen as an indication that reform is likely, or perhaps it is more a result of the conservative nature of rating agency Fitch.
Fitch’s analysis makes sense – if a public plan option is passed that includes the ability to force providers to accept Medicare or similar rates, then it will murder the private insurers. But that is just not going to happen. There is zero chance of any reform measure passing that includes a public plan reimbursing at Medicare – or any rates close to Medicare.
The ratings company’s assertion that reform that includes guaranteed issue without mandated universal coverage and/or pricing flexibility and/or underwriting is a bad idea has been convincingly demonstrated in Massachusetts.
That doesn’t mean the industry has substantial risk. But that risk is more resulting from the current economy than the potential problems from health reform. This was confirmed by Mark Farrah & Associates’ report that the top eight plans lost more than four hundred thousand commercial members in the most recent quarter. If anything, the employment picture is a lot more significant for health plans than the much less likely chance of public plans and other ‘maybe’ events. According to Farrah;
“WellPoint and UnitedHealth, the two largest plans in the United States, saw total enrollment declines of 490,000 and 465,000 respectively. The economy and maintaining strict pricing and underwriting discipline were cited as reasons for the declines.”
What Fitch is not adequately considering is the very real opportunity for health plans. The smart ones (a limited population to be sure) will see this as a big chance to gain millions of members. The even smarter ones will quickly move to slash their admin expenses by eliminating underwriting, refining marketing, and investing heavily in population health.
I’d note that Fitch now has awarded all plans the coveted ‘negative’ status; I believe this is misguided, as there are clearly several that are better positioned to take advantage of reform (if it happens). I’d include Aetna in that group; they actually gained 1.4 million members in Q1 2009.
Aug
7
