Standard & Poor’s Ratings Services continues to hold a stable outlook on the managed care industry into the 2008, despite potential problems.
S&P, a division of the McGraw-Hill Companies, New York, thinks health insurers will be nervous about the results of next year’s elections. They wonder if a new administration in Washington would begin health care reforms that fundamentally change their business models or profitability, S&P says.
The industry is aware that its growth prospects have narrowed significantly, particularly in the commercial markets, and consolidation has left few weak players from which to take business, the rating service notes.
“As a result, managed care companies are now focusing on the promise of new products, such as consumer-directed health plans, policies for the self-employed and policies for healthy, uninsured young adults,” according to the new S&P report, “2008 U.S. Managed Care Insurer Outlook.”
Health insurers are pushing into the small-business market, where health insurance is often strictly a voluntary benefit rather than employer-paid, and are looking to sell more insurance to individuals, where underwriting skills are critical to product success.
“Most growth in recent years has been through Medicare Advantage, Medicare Part D, and Medicaid programs,” S&P states. “Finding new lines of business or new geographic areas in which to operate will become increasingly important for health insurers, and those factors will receive increased emphasis in our ratings evaluations.”
Earnings for managed care companies have slowed. Although there are opportunities for increased profitability through small mergers and cost control, “the industry is past the peak of its cycle,” says S&P.