UnitedHealth Group

Health plans to boost premiums, squeeze providers

Wed, 14 May 2008 06:59:57 -0400

As readers know, several leading health plans have taken a profitability beating over the last several months, for reasons that include operational issues, medical costs and losses in the financial markets. WellPoint, for one, missed Wall Street's first-quarter profit estimates by a wide margin, something that made financial analysts more than a bit nervous.

Now, hoping to calm watchers on the Street, industry leaders like WellPoint and UnitedHealth Group are assuring investors that they plan to raise premiums enough to stabilize their income--even if it means losing some members. "We will not sacrifice profitability for membership," WellPoint President and CEO Angela Braly recently told analysts during a conference call.

At the same time, the plans are promising to use their muscle to get better deals from their provider networks. This vow isn't surprising, given that both the plans and analysts see medical costs as a critical factor in sapping industry profits this year. However, it's not clear that plans like UnitedHealth--already known for extremely aggressive negotiations--can cut reimbursement any further.

To learn more about this trend:
- read this AMNews article

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Fear and trembling in health plan land

Wed, 07 May 2008 06:59:59 -0400

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

Following peers, Kaiser profits plunge

Wed, 07 May 2008 06:59:58 -0400

As FierceHealthFinance readers probably know, the last few weeks have been ugly for health plans, many of which announced disappointing first-quarter results. True, it's worth bearing in mind that most are still profitable, but on the other hand, their margins seem to be in freefall--something neither shareholders nor Wall Street take lightly. Many of the industry's big names are being hit by this trend, including UnitedHealth Group, Humana, Cigna, WellPoint and Health Net.

This week, Kaiser Foundation Hospitals and Health Plan joined the list of unfortunates, announcing that it saw a 64 percent drop in net income during the first quarter of this year compared to the same quarter last year. Profits plunged $698 million during the first quarter of last year to $250 million for the first quarter of this one. The descent includes a loss of $295 million in non-operating income for the first quarter of 2008 versus a $177 million profit during the first quarter of 2007, which it attributes to weakness in its investment portfolio.

Meanwhile, Kaiser increased net income from $521 million during the first quarter of last year to $545 million this year, a boost that includes the addition of 25,000 members. Operating income climbed from $9.4 billion during the first quarter of last year to $10.1 billion for the first quarter of this year. Furthermore, Kaiser said it provided more than $1 billion in community benefit during 2007.

To learn more about Kaiser's results:
- read this East Bay Business Times article
- read this Kaiser press release

PLUS: Kaiser has announced that it's completed the rollout out of its immensely expensive outpatient electronic medical system, which cost the organization a cool $4 billion, executives said. Article

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Insurer troubles could mean more bad debt for providers

Wed, 30 Apr 2008 06:59:58 -0400

In recent weeks, health insurers have started announcing financial results, and the news hasn't been good. WellPoint, for example, saw profits fall 25 percent, and UnitedHealth Group recently lowered its 2008 profit outlook by 40 cents per share. With insurers feeling financial pain, they're likely to raise premiums next year. In response, companies are likely to ask employees to carry more healthcare costs, industry watchers say. The net effect of all of this buck-passing is that with consumers facing higher bills, providers are likely to face high levels of bad debt, financial analysts predict. That's the case, in part, because consumers will be facing not only higher bills, but also a tougher economy and challenging job market, both of which further limit their ability to pay down medical debt. Add that to confusion over the use of the National Provider Identifier on Medicare claims--which could slow payments substantially--and 2009 is shaping up to be a very difficult year for providers, especially hospitals, healthcare analysts warn.

To learn more about this trend:
- read this InsideARM piece

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