Health Insurers Hedge Their Bets
Friday, August 15, 2008 : PermalinkBusinessWeek - For managed-care organizations (MCOs), which footed the bill for roughly 34% of U.S. health care spending in 2007, health-care reform presents uncertainty and opportunity. Proposals now being debated in Washington and the different states aren’t affecting near-term business, says Phillip Seligman, a Standard & Poor’s equity analyst who follows MCOs. Nor are MCOs currently incorporating reform proposals into their guidance for 2008 or beyond.
Nevertheless, payers are expecting at least incremental changes to the system, given the level of concerns about spiraling health-care costs and growing lack of access to affordable health insurance. On this, a panel of Wall Street analysts concurred at a recent conference on health-care reform sponsored by the Center for Studying Health System Change (CSHSC).
Because they aren’t sure how reforms will play out, MCOs are hedging their bets by diversifying into new markets and product lines that offer a wide range of coverage and pricing options. Many of these products are designed to appeal to price-sensitive small-group and individual buyers. MCOs traditionally considered these to be modest niche markets at best, but now view them as important for future growth, particularly if reforms initially focus on getting coverage for the uninsured, as is currently expected from the political rhetoric surrounding the issue.
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