A.M. Best Special Report: Health Insurers' Financial Results Will Be Tested As Markets Evolve

Business Wire, Jan 21, 2008

OLDWICK, N.J. -- Despite competitive pressures, health insurers and managed care companies have maintained strong earnings in recent years because of stable medical cost trends, improved case management and technology efficiencies. Insurers, though, will have to navigate a challenging operating landscape in 2008, according to a special report by A.M. Best Co.

* Health insurers active in Medicare and Medicaid may experience higher medical loss ratios overall because of the greater frequency and dollar amount of claims from these programs.

* Earnings at nonprofit Blue Cross Blue Shield Plans may decline as these insurers again focus on generating earnings from income rather than underwriting gains.

* Although the Medicare Advantage program has contributed to enrollment growth, reimbursement rates, particularly for private fee for service plans, have drawn attention from Congress.

* A.M. Best expects a similar pace of merger and acquisition activity, as in 2007, since most publicly traded health insurers have the cash and debt capacity to fund transactions.

* The average medical loss ratio for provider-owned and affiliated health plans could face pressure because of competition and a higher cost structure.

* Proposals by presidential candidates to reform health care include Medicaid expansion, granting states flexibility to develop coverage mandates and tax credits to pay for expenses.

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Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.