Cost trends expected to rise
Earnings are strong despite reform, insurers say
Despite headwinds brought by federal health reform, major insurers have reported strong earnings and raised 2011 forecasts in recent weeks. First-quarter earnings reports from top publicly traded health insurers showed continued low provider utilization trends, despite the economic recovery, and little adverse effects from the earliest provisions of the reform law.
UnitedHealth Group, WellPoint, Aetna, Humana, Cigna and Health Net all raised their full-year earnings guidance as a result. UnitedHealth Group, the largest insurer by revenue, is now forecasting 2011 revenues approaching $101 billion.
Insurers attributed lower-thanexpected medical utilization to bad weather—if patients can’t get to the doctor because of a snowstorm, then insurers have fewer medical claims to pay. But analysts seemed wary about attaching too much credence to this explanation, and UnitedHealth Group, Aetna and others said they expect cost trends to rise over the course of the year.
Aetna, for one, saw a decline in hospital bed days over last year as well as fewer physician visits. And, unlike WellPoint, Aetna did not see evidence of higher acuity among patients.
“We suspect WellPoint will be analyzing these higher acuity claims more to make sure that hospitals aren’t finding new ways to charge patients more to try and make up for the drop in commercial bed days,” Citi senior analyst Carl McDonald said in an investor note.
Beyond positive utilization trends, insurers reported that new federal rules on how they spend member premium dollars are having little adverse impact on earnings. A provision of the Patient Protection and Affordable Care