We published the above headline in our February Newsletter. Since we published the newsletter a number of large insurers have released their quarterly results.  See article on Aetna Healthcare.

Slumping Profit Margins Predicted For Health Plans Through 2011

As we pointed out, health insurance companies are getting both downward pressure due to loss of  members. That unfortunately does not tell the whole story.  Layed off workers that are healthy do not elect cobra.  Layed off workers that have significant medical problems elect to pay for their insurance through cobra.  This creates a self-selection.  Insurance companies are feeling the pinch of lower revenue and  increased care cost per member they are insuring.  Insurance companies can react in a number of ways.

Slumping Profit Margins Predicted

1. Increase premiums

2. Increase scrutiny of medical services they are paying.  This will result in increased denials of care.

3. Try to remove high cost groups or members

We at BHM believe that most insurers will do a bit of all three methods to improve profits but because of the current economic environment we believe that increased denials maybe the method of choice. In future blogs I will be addressing what insurance companies can do to help reduce the cost of care in a strategic way.   We will also address what providers of care as well as consumers can do to prepare for these changes and possible increase in insurance denials.