US health insurance sector in pink of health
Venkatachari
Jagannathan
07 June 2002
US
citizens are now comparing health insurance costs with
their mortgage payments, says another analyst. In the
chain of cost increases from hospitals to insurers, from
insurers to employers, and from employers to employees,
none is proving a weak link. Were going to see a trend
of employees taking on more of the costs and contributing
an increasing percentage of premium.
S&P, this time around, takes a good look at the hospital costs, which account for about 30 per cent of total health expenditure. Faced with their own labour shortages, the demands of an aging population, rapid advances in technology, and the soaring costs of medical malpractice coverage, health care providers and hospitals are joining forces through mergers and acquisitions to exert greater leverage in their negotiations with insurers, finds an S&P study.
According to S&P the bargaining clout of hospitals is further enhanced by their improving performance, based on strong revenue growth and patient volume increases. Meanwhile, doctors represent about 20 per cent of health costs and are represented by a medical association, which is demanding more leeway in members ability to make medical decisions and is pressing for legislation to support collective bargaining.
On the other hand the insurers have been able to compensate the increase in payouts with double-digit premium rate increase for the third year in succession.
Health coverage is the one insurance sector in the US that has exhibited commendable pricing discipline in recent years, says S&P. Robust premium hikes since 1998 have supplanted the industrys prior appetite for market share, with competition resting on product and service differentiation rather than on lower pricing.
The result is that insurers now decline unprofitable business lines and withdraw from poorly performing regions. A key example is Oxford Health Plans Inc, which, having expanded its business to unmanageable proportions, began a turnaround in the late-1990s that refocused on its core markets to become one of the most profitable health insurers in the industry today. More recently, Humana Inc, Health Net and UnitedHealth Group Inc have made strides in redefining their core markets, cites S&P study.
