Some of the nation’s top managed care plans have released their third-quarter 2008 financials, and we’re looking for signs of hope amid the carnage of recent memory.
WellPoint said third-quarter net income declined; however, the company is projecting a “single-digit” increase in earnings in 2009. Coventry got whacked, reporting a 49% decline in third-quarter profits; the company said it won’t fully bounce back until 2010. UnitedHealth’s third-quarter 2008 earnings fell 28%; however, the company expects improvement in 2009.
Industry-wide improvement in 2009 hinges largely on a simple outcome, i.e., that premium rate increases keep pace with costs. We’re not allowed to use the words “insurance cycle” or imply that a down “insurance cycle” has negatively affected profitability among health plans. Except for the fact that costs in some cases have run ahead of premiums, squeezing profit margins, and hammering stock prices—all the things that point to a down cycle—we’re not supposed to admit that an “insurance cycle” even exists.
By extension, therefore, we’re not supposed to suggest that the “insurance cycle” will turn favorable again in 2009 and beyond. Therefore we won’t say the “insurance cycle” is going to turn favorable in 2009, which is a good thing because we’re not actually sure the “insurance cycle” will turn favorable in 2009 even if an “insurance cycle” existed, which it doesn’t.
Our uncertainty stems from premium projections for 2009 that look pretty similar to 2008, continued commercial competition, and the feeling that very real drop-offs in utilization because of the down economy probably won’t be a big enough offset next year. We’re looking more toward 2010 for a turnaround, barring any big policy changes coming out of a new Administration in Washington and assuming there is such a thing as an “insurance cycle,” which of course, there isn’t.
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