Care Wars II: The Return Of The Market Forces

NU Online News Service, May 2, 6:15 p.m. – Many managed care companies are bragging in their first-quarter earnings reports about their ability to demand double-digit price increases for the fourth year in a row.

At some companies, rate increases are barely keeping up with claims increases, but other companies say their profit margins are definitely expanding.

So what will make the pendulum swing back the other way?

Christopher Swift, the Chicago-based national director of the insurance audit and tax practice at KPMG L.L.P., predicts employers will keep rates from reaching the sky by switching to defined-contribution health plans, rather than by pushing the kinds of single-payer measures and other drastic reforms proposed in the early 1990s.

“You can never count out regulatory responses,” Swift says.

But Swift, who has been following the health care finance market for two decades, points out that state regulators have approved the increases, and that the years of increases have come after a period of ferocious managed care price competition in the mid-1990s.

“The health insurers were losing way too much money,” Swift says.