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Will Medicare eat the commercial health market?

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Many publicly traded health insurers are talking more about their Medicare and Medicaid plan sales these days than about their traditional commercial health insurance operations.

Stephen Zaharuk, a rating analyst at Moody’s Investors Service, says the shift toward the government plan market could accelerate as the aging of the baby boomers expands the number of people eligible for Medicare.

Zaharuk looks at insurers’ growing dependence on Medicare in a new Moody’s report on the effects of the aging of the U.S. population on the health care industry.

The analysts’ outlook on the industry could affect insurers’ ratings. An insurer’s Moody’s ratings may determine how much it pays for capital, and whether customers trust it to pay claims.

Just 15 years ago, insurers were fleeing from a private Medicare plan program that sprang up in the 1990s, the Medicare+Choice program, over concerns about shifts in program rules and funding levels.

Today, insurers are flocking to the Medicare Advantage, Medicare supplement insurance and Medicare Part D prescription markets.

See also: Carriers get surprise Medicare raise

Moody’s still worries about Medicare plan issuers’ vulnerability to changes in government regulations and spending, but “our concern has somewhat abated now that the government has placed more reliance on private insurers to provide health care coverage for large segments of the population,” Zaharuk writes.

Insurers may now depend more on government plan business, but the government now depends more on the insurers, Zaharuk says.

Zaharuk sees tight federal budgets and the arrival of expensive new treatments as the chief threats to insurers serving older Americans.

Insurers will have to show that they can use tools such as evidence-based care and patient engagement programs to hold down the cost of care and improve outcomes, Zaharuk says.


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