Health plans have been enjoying strong profits almost entirely because member utilization of healthcare services (and in turn healthcare costs) has been growing at historically low rates. So it’s no surprise that when UnitedHealth Group reported today it expects an upswing in utilization trends, shares in the company sank (down nearly 4% as of presstime).
UnitedHealth chief executive Stephen Hemsley said on the company’s third-quarter earnings call that “medical utilization will trend toward more normal historical and seasonal levels” in the fourth quarter of 2011 and into 2012. The upswing is expected to impact all product lines (including commercial, Medicare and Medicaid) and will largely be for services performed in physician and outpatient settings, Hemsley says. Inpatient utilization remains flat to down. The company is also seeing treatment costs rise for hepatitis C because of the introduction of certain new drugs.
Overall, UnitedHealth expects consolidated medical cost ratio to increase to 81% in 2011 and to rise again 2012. Commercial medical costs are expected to increase about 6% in 2011, driven by unit costs. Meanwhile, the company is beginning to see pockets of price competition, says United Healthcare president Gail Boudreaux, especially in California and parts of the northeast and mid-Atlantic regions. Still, she notes, price competition is far from across the board.
UnitedHealth tends to be a bellwether of industry performance, so health plan observers will be waiting to see if other insurers report similar trends.
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