Profit Might Decrease for Health Insurers
The seven largest U.S. health insurers might "find their business shriveling" in the future as many smaller companies drop coverage for employees, the Wall Street Journal reports. The companies had a combined $10 billion in profits last year as they "raised their prices faster than underlying health costs," the Journal reports.
According to the Kaiser Family Foundation, 59% of employers with fewer than 200 employers currently provide health insurance for employees, compared with 68% in 2000. The trend might prompt health insurers to consider reductions in price increases, but, "if they restrain price increases, or appear to, they get hammered by Wall Street," the Journal reports.
Many health insurers have said that they would "rather miss their targets for membership than succumb to a price war," but their "resolve to price every account at a profitable level means" that small and mid-sized companies "can be quickly priced out of the market," according to the Journal.
Robert Laszewski, a health care consultant, said that health insurers must revise their current business practices to prevent losses in the employer-sponsored health insurance market, adding, "Where is this industry in four, five years if it can't control health care costs?"
Jon Rubin, CFO of the Cigna health care business, said that he has some concerns about the employer-sponsored health insurance market but added that "you still have a growing employee population that needs coverage." In addition, he said, "We need to drive new solutions because, ultimately, the trends that are reflected in the premium simply are not sustainable. The only viable alternative is the advance of consumerism."
Some experts said that the problems in the employer-sponsored health insurance market indicate a need for a "single-payer" system in which the federal government would guarantee or require coverage for all U.S. residents. However, according to the Journal, the potential cost of a single-payer health insurance system and opposition from those who support a "free-market approach make it an unlikely prospect anytime soon" (Fuhrmans, Wall Street Journal, 7/31).