Zacks Industry Outlook Highlights: Aetna, WellPoint and CIGNA - Press Releases
December 16 2011 - 3:30AM
Zacks
For Immediate Release
Chicago, IL – December 16, 2011 – Today, Zacks Equity Research
discusses the Health Insurance, including Aetna
Inc. (AET), WellPoint Inc. (WLP) and
CIGNA Corp. (CI).
A synopsis of today’s Industry Outlook is presented below. The
full article can be read at
http://www.zacks.com/stock/news/66399/Health+Insurance+Stock+Review+-+Dec.+2011
Over the past 10 years, health insurance premiums have
persistently increased, outpacing the growth of wages and cost of
living. The surge in premiums -- due mostly to complex connections
among health insurance companies, health care providers,
pharmaceutical manufacturers and the medical technology industry --
has been witnessed in both employer-sponsored insurance as well as
individual insurance.
Total premiums for employer-sponsored insurance doubled in the
1999-2009 period. The individuals market also saw rapid growth in
the cost of premiums. Insurance companies have also been known to
denying coverage because of pre-existing conditions, and for
charging higher premium in the individual market.
Increasing industry consolidation also left lesser insurance choice
for Americans, who were reeling under rising health care costs.
Since 1996, the industry has witnessed acquisitions worth about $90
billion, resulting in dominance by just a few players.
Consolidation and market dominance consequently led to a decline in
competition. Big insurers dominating large markets hardly ever
bothered to provide even the basic information to consumers, such
as the performance of health insurance policies, procedures to
claim, the size of provider network and cancellation procedure.
Moreover, in the absence of any reasons or incentives to lower
policyholders’ cost, insurance companies went on making increasing
profits year after year. According to HealthReform.gov, profits of
the ten largest insurance companies increased 250% between 2000 and
2009 -- ten times faster than inflation. Though the industry saw
lower enrollment (medical membership) due to the latest recession,
major health insurance companies managed to remain profitable by
increasing their insurance premiums.
Looking at the other end of the spectrum, health insurance
companies also benefited from low utilization amid recessionary
conditions. A high deductible and high out-of-pocket cost kept the
cash-strapped Americans away from the clinics, leading to lower
utilization of health care services. A recent analysis from the
Kaiser Family Foundation revealed that even people with insurance
are opting for medical checkups less frequently, with the number
actually dropping most dramatically after the recession technically
ended. Patients made 17% fewer doctor visits in the second quarter
of 2011 than in the second quarter of 2009.
Over the past couple of years, lower utilization has played a very
prominent role in helping the profitability of the major players in
the health insurance sector. Most of the carriers continued to beat
earnings estimates in recent quarters, benefiting from lower claim
payments.
According to insurance majors like Aetna Inc.
(AET), WellPoint Inc. (WLP) and CIGNA
Corp. (CI), medical utilization trends haven’t moved much.
Since these insurers hold major market share, any indication from
them confirms the fact. But, some uptick in utilization rate can be
expected in data for the final quarter of the year as policyholders
try to go for the long delayed checkups.
However, low medical utilization is a short-term factor affecting
the industry. Over the longer term, issues including the effects of
health care reform and negative economic consequences will reshape
the industry.
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AETNA INC-NEW (AET): Free Stock Analysis Report
CIGNA CORP (CI): Free Stock Analysis Report
WELLPOINT INC (WLP): Free Stock Analysis Report
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