Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Health Insurance

Care Wars II: The Return Of The Market Forces

Your article was successfully shared with the contacts you provided.

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.

Now, he says, the market seems to be back to where it was in the early 1990s, with the main difference being that, this time around, the hot new idea is the defined contribution plan, rather than the health maintenance organization.

The typical defined contribution health plan combines high-deductible, catastrophic health insurance with employer-funded personal health care accounts. Employers usually contribute a set amount per employee.

Critics worry that the defined-contribution approach will punish employees with medical problems and discourage employees from seeking preventive care.

Supporters say the system will give all employees an incentive to be careful health care consumers while offering sick employees the freedom to seek care without coping with red tape.

Swift sees KPMG clients starting to take the concept far more seriously than they did two years ago, when his firm first started releasing papers on the topic.

“I think that’s where the future lies,” Swift says.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.