Health insurers in the United States to restore profitabilit

 

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23 March 2009

435 words


U.S. health insurance is expected to restore profitability: S & P

JOANNE WOJCIK



Despite an impact of the recession could have on revenue and profit growth this year, health insurers in the United States should take measures in 2009 to restore the profitability of their elders, according to Standard & Poor's Corp.

Based in New York S & P revised its outlook for health insurers in the United States in November 2008 negative because many insurers earnings fell well below projections because of the underestimation of the evolution of medical costs, an unexpected change in the mix and the lack of prices of some Medicare Advantage and Part D programs for prescription drugs, the New York ratings agency reported.

As a group, insurers of the 37 S & P monitors reported that 2008 revenues were approximately 25% less than estimates.

In addition to increasing premiums for some lines of coverage, insurers will also reduce administrative costs, according to S & P, which has made recent layoffs, in Bloomfield, Conn.-based CIGNA Corp. and Indianapolis-based Wellpoint Examples inc. Insurers have cut 4% and 3.5%, respectively, of their forces and closely monitor their budgets, the payment rates of Medicare and the potential impact of national health reform might have on their margins after 2009, analysts from S & P said in the report, "" The benefits for health insurers Rebound in 2009?''

`` For the 37 insurers in our database in 2008, earnings were approximately 25% below expectations, we did this year,''said Standard & Poor's Neal Freedman, an analyst in a credit . `` A total of 19 insurers eventually cut their 2008 earnings forecasts.''


Among this group, S & P rating lowered on September, revised the outlook to stable from negative opinions and affirmed with a stable outlook on the other nine, noted Mr. Freedman.

S & P is also paying special attention to the business in Minnetonka, Minn.-based UnitedHealth Group Inc. and Woodland Hills, California-based Health Net Inc., where enrollment in small or medium were employers less than projected for 2008.

`` Less than anticipated enrollment in the insured, commercial, small and medium-sized group was a significant contributor to earnings shortfalls in 2008,''the report by S & P said.

S & P attributes much of their income in insurance business to Medicare negative selection caused by the entry of more beneficiaries to take advantage of benefits available.

S & P's report on the United States health insurers' profitability is available to subscribers of RatingsDirect www.ratingsdirect.com, or it may be purchased by calling 212-438-9823 or sending an e - mail to research_request@standardandpoors.com

26 March 2009

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