Fear and trembling in health plan land

Well, this week caps it. It seems like we're looking at just about a clean sweep where bad-news health plan financials are concerned: UnitedHealth Group, Humana, Cigna, WellPoint, Kaiser and Health Net have already taken a hit, and that's just for the first quarter. It's hard to imagine the second quarter of this year will bring dramatically better news, either.

Now, it's worth noting that we're talking primarily about plans that have watched profits fall, not plans who've sunk into the red. It's not like WellPoint or Kaiser are headed for bankruptcy court by any means. But we are talking about a shock to the industry--and some plans are indeed in the hole. For example, Moody's has placed Health Net's senior debt on review for a downgrade following its first quarter net loss of $35.7 million.

So what's going on here? A lot of different factors seem to be in play, including the turmoil in the financial markets, medical costs, legal and regulatory issues, and more. For example, as you'll see in today's newsletter, Kaiser attributed its losses largely to the subprime mortgage debacle. Oxford Health Plans, meanwhile, reported a medical loss ratio of 102.8 percent in addition to losing money on Wall Street. (In other words, for those that don't speak insurance, Oxford paid out almost $1.03 for every premium dollar it took in.) Health Net took a drubbing, in part, because it had to pay off regulators in California who were fed up with its practice of canceling individual policies after they were issued.

Once Wall Street recovers, the plans' investment income will again cover a multitude of sins, and the industry will regain its swagger. In the meantime, things aren't going to be pleasant for its leaders, and providers who have to strike deals with them may find themselves getting savaged. After all, it can be dangerous to be trapped in a room with a rabid health plan executive. - Anne