Corporate Research Group’s Weblog

HMOs had a strong first half of 2011, with net income soaring 40%, according to our tally of financial data for 193 health plans in 12 states.  Net margin was 4.2%.  

A turnaround in Massachusetts and big gains in California and Michigan accounted for most of the increase.  Fully funded HMO membership for the 12 states declined 2%—continuing a trend of eroding enrollment.

Complete details are available in the latest issue of Health Plan Market Trends.

Two weeks after WellPoint shares sank 8%—largely because of poor Medicare Advantage results—the company announced it had fired Brian Sassi, who heads up the company’s consumer business unit (Medicare, Medicaid and individual).  Sassi will remain with the company until early March to assist in the transition of his duties.   No replacement was named.

The big question any time a key executive is shown the door is whether the move indicates other problems will come to light—which is probably why the company simultaneously reaffirmed 2012 earnings guidance of $7.60 per share.  The company also says its Medicare Advantage problems are behind it. 

But you can understand why Wall Street is jittery.  Consider the chronology.  The problem with Medicare first surfaced in the middle of last year when the company announced a second-quarter profit shortfall because of adverse selection in its northern California regional Medicare PPO—a product that lost $150 million and which the company has discontinued.  

WellPoint executives said at the time that the problem was confined to California and that it wouldn’t be an issue in 2012.  Now WellPoint says it experienced similar Medicare adverse selection in other states as well—impacting fourth quarter profits.  Again the company says its products are priced appropriately and profits will improve in 2012.

The problem is Medicare Advantage bids for 2012 were submitted in June 2011.  “WellPoint couldn’t have known the Medicare business would perform so badly in the fourth quarter when they submitted 2012 Medicare bids back in June,” notes Carl McDonald of Citi.  He adds, “WellPoint didn’t do a real effective job of explaining why it wouldn’t be a problem in 2012.”

Not all publicly traded health plans have reported fourth-quarter financials yet, but the eight that did posted a combined 1% increase in net income at their health insurance operations.  Revenues for the quarter rose about 8%.  For the full year 2011, net rose 5.4%, while revenues were up 7%.  Coventry, Health Net and WellPoint were among the plans posting declines in fourth-quarter net income.  Complete coverage appears in the Feb. 6 issue of Health Plan Market Trends.

Three top managed Medicaid executives will discuss the $300 billion dual eligible opportunity for health plans on Wednesday, April 18, in Washington, DC.  The event is CRG’s conference on the Dual Eligible Opportunity for Health Plans.  We are expecting a sold-out crowd so click here to register early.

The Dual Eligible Opportunity for Managed Care
The dual eligible market, with nearly 9 million members, represents a $300 billion opportunity for health plans.  The stakes are huge, but so are the challenges – even for Medicaid and Medicare plans accustomed to the ins and outs of government-sponsored programs.  During this keynote address, you’ll get a clear assessment of the size and profit potential of duals for managed care – as well as an understanding of type of skill-sets and investments required to succeed.

Kevin Hayden President of State-Sponsored Business WellPoint

Assessing the Dual Eligible Pipeline: Which Health Plans Are Best Positioned to Win Question: Which health plans are the most likely to benefit from the dual eligible market – Medicare or Medicaid plans?  Answer: Both.  However, Medicaid is probably best positioned to take the bigger share.  On this panel, you’ll get a competitive assessment of which health plans are most likely to win big in the dual eligible market and why. 

Tom Kelly President & CEO Schaller Anderson an Aetna Company

Legal and Regulatory Challenges in the Dual Eligible Market: A State-by-State Assessment
Competing in the managed dual eligible market means keep tabs on a wide variety of legal and regulatory issues on both the state and federal level.  On this panel, you’ll get a breakdown of trends, developments and key areas of concern on the legal and regulatory front– information essential to planning any dual eligible strategy.

Thomas Johnson President and CEO Medicaid Health Plans of America

For those of you who thought payment cuts would kill Medicare Advantage, think again.  HHS reports Medicare Advantage membership have risen 10% and premiums have fallen 7% since this time last year.  Average premiums are $31.54 in 2012, while enrollment stands at 12.8 million. ”Since 2010, when the Affordable Care Act was passed, Medicare Advantage premiums have fallen by 16 percent and enrollment has climbed by 17 percent,” HHS notes.

From Citi analyst Carl McDonald:

Fundamentally, things aren’t going to be as good for managed care in 2012 as they were in 2011 — While pricing remains above cost trends this year, the spread isn’t nearly as wide as it was in 2011, primarily because premium rates have moderated. In addition, favorable prior year development will now be subject to the minimum MLR calculation, which wasn’t the case last year.