Rating analysts at Fitch Ratings, New York, are hoping the recent moderation in health care cost increases will continue.
For the past few quarters, executives at big, publicly traded health insurers have tried to downplay securities analysts' and investors' expectations about future profits. Profits were strong in 2010 and 2011 partly because the cost of covering medical claims was lower than carriers had expected.
Executives suggested that lower-than-expected health care spending might be due to factors such as a mild flu season and plan enrollees' inability or reluctance to pay higher co-payments and meet higher deductibles.
The executives warned that a return of the flu, improvements in the economy that ease the pain of higher co-payments, and the effects of the Patient Protection and Affordable Care Act of 2010 (PPACA) minimum medical loss ratio all could cause plan members' health care spending to accelerate.
Stephen Hemsley, president of UnitedHealth Group Inc., Minnetonka, Minn. (NYSE:UNH), reported last week during an earnings call for the fourth quarter of 2011 that his company has started to see health care utilization return to what it thinks of as normal.
The increase in the second half of 2011 "was most prominent in outpatient and physician office settings," Hemsley said. "We expect higher utilization trends to continue steadily throughout 2012."
But Fitch analysts say in a comment that ongoing changes in the U.S. health care industry could lead increases in costs to slow for years to come.
In 2011, spending increased 3.9%, to $8,402 per person.
Total spending increased, but less than in the past, and Fitch analysts say they believe the relatively modest increases are due to long-term changes in the health care system as well as the weak economy and the recent drop in the percentage of U.S. residents with health coverage.
Increases in the amounts employees in group plans pay out of pocket for health care could have a lasting effect on group plan enrollees' spending, and state cuts in Medicaid reimbursement rates could reduce the amount of care that Medicaid plan enrollees get, the analysts say.
"These conditions will likely persist after the end of the current market downturn and continue to depress the overall growth rate," the analysts say.
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