Health insurers’ good year


A new Bloomberg Government study out this morning finds that health insurance companies have had a pretty stellar financial year. Returns on investments have surged ahead of general stock indexes and, as the above chart shows, anyone who invested $1 in health plans back in October 2008 has seen that grow to about $1.70.

How do health insurance companies prosper as fewer Americans have health coverage? It has a lot to do with more Medicaid and Medicare enrollees getting health care coverage through private health insurers. More from my colleague N.C. Aizenman:

Essentially, the private companies are hired to run managed-care plans as an alternative to the traditional fee-for-service plans provided by the two programs. Under the arrangement, the insurer receives a fixed amount from the state or federal authority ultimately responsible for a given Medicaid or Medicare population. In many cases, the insurer can then keep part of any savings it generates by managing the care of the covered population more cost-effectively.

The practice is attractive to states seeking to curb spending on Medicaid, which is funded with a combination of state and federal dollars. Privately run Medicare managed-care plans — called Medicare Advantage Plans — have also long been common.

That means huge business for health insurance plans. A recent report from Citi analysts estimates that states will release $40 billion worth of Medicaid contracts between now and 2014, meaning the trends that Bloomberg Government sees in this report will near certainly continue in the coming years.

business

Success! Check your inbox for details. You might also like:

Please enter a valid email address

See all newsletters

Comments
Show Comments
Most Read

business

Success! Check your inbox for details.

See all newsletters