ugh
the American health insurance industry remains relatively immune to
economic problems, is still grappling with fundamental changes and the
resulting growth of labor. The
industry is facing its share of problems associated with slow economic
recovery, uncertainty about the health reform law and an increased
regulatory control.
Despite the odds, the industry remains profitable, with the top six players - UnitedHealth Group Inc. (UNH), CIGNA Corp (CI), WellPoint Inc. (WLP), Aetna Inc. (AET), Humana Inc. (HUM), Coventry Health Care Inc. (CVH) - reporting year-over-year earnings growth in FY11.
About the Industry
The American health and medical insurance industry is an integral part of the U.S. economy. According to the Centers for Medicare and Medicaid Services, U.S. health spending accounted for about 18% of the GDP of the country. According to the World Health Organization, health spending per person is higher in the United States than any other country in the world.
Despite the rapidly growing health care spending in recent decades has been characterized by increasing health insurance premiums, limited policy choice and lack of transparency.
In the past 10 years health insurance premiums have risen steadily, faster than the growth of wages and cost of living. Premium surge (as a result of complex links between health insurers, healthcare providers, pharmaceutical manufacturers and medical technology industry) is witnessing both the employer-sponsored insurance and individual insurance.
Total premiums for employer-sponsored insurance has doubled in the period 1999-2009. The individual market also saw a rapid growth in the cost of the premium. As a result, only 5% of a non-elderly Americans ensured. According to the United States Census Bureau, in 2009 there were 50.7 million people in the U.S. (16.7% of the population) who were not insured. The percentage of uninsured non-elderly is a continuous increase since 2000. Insurance companies are also known for refusing to cover the case of pre-existing illnesses, and to charge higher premiums in the individual market.
Increasing consolidation of the insurance sector is also a limited choice for the Americans, who were reeling under the rising cost of healthcare. Since 1996 the industry witnessed acquisitions worth about $ 90 billion, resulting in the dominance of a few players. The period 1990-2000, the industry witnessed about 400 large and small mergers and acquisitions (M & A).
Consolidation and market dominance thus resulted in a decrease in competition. Major insurers dominate the major markets, rarely or never bothered to even the basic information to consumers, such as the performance of the health insurance policy, procedures to claim, the size of the provider network and cancellation procedures.
Moreover, in the absence of any reason to policyholders' costs, insurers went on increasing profits year after year. Recent economic data from HealthReform.gov showed that the profits of the ten largest insurance companies increased 250% between 2000 and 2009 - ten times faster than inflation. While the industry saw a lower enrollment (medical membership) as a result of the last recession, large insurers managed to remain profitable by increasing their premiums.
Looking at the other end of the spectrum, health insurers also benefited from a low occupancy in the midst of a recession. A high deductible and high out-of-pocket costs kept the cash-strapped Americans away from the clinics, leading to lower utilization of health care. A recent analysis by the Kaiser Family Foundation shows that people with insurance for medical checks less frequently chosen, the number fell sharply after the recession technically ended. The year 2011 saw suppressed usage trends with respect to historical levels.
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Despite the odds, the industry remains profitable, with the top six players - UnitedHealth Group Inc. (UNH), CIGNA Corp (CI), WellPoint Inc. (WLP), Aetna Inc. (AET), Humana Inc. (HUM), Coventry Health Care Inc. (CVH) - reporting year-over-year earnings growth in FY11.
About the Industry
The American health and medical insurance industry is an integral part of the U.S. economy. According to the Centers for Medicare and Medicaid Services, U.S. health spending accounted for about 18% of the GDP of the country. According to the World Health Organization, health spending per person is higher in the United States than any other country in the world.
Despite the rapidly growing health care spending in recent decades has been characterized by increasing health insurance premiums, limited policy choice and lack of transparency.
In the past 10 years health insurance premiums have risen steadily, faster than the growth of wages and cost of living. Premium surge (as a result of complex links between health insurers, healthcare providers, pharmaceutical manufacturers and medical technology industry) is witnessing both the employer-sponsored insurance and individual insurance.
Total premiums for employer-sponsored insurance has doubled in the period 1999-2009. The individual market also saw a rapid growth in the cost of the premium. As a result, only 5% of a non-elderly Americans ensured. According to the United States Census Bureau, in 2009 there were 50.7 million people in the U.S. (16.7% of the population) who were not insured. The percentage of uninsured non-elderly is a continuous increase since 2000. Insurance companies are also known for refusing to cover the case of pre-existing illnesses, and to charge higher premiums in the individual market.
Increasing consolidation of the insurance sector is also a limited choice for the Americans, who were reeling under the rising cost of healthcare. Since 1996 the industry witnessed acquisitions worth about $ 90 billion, resulting in the dominance of a few players. The period 1990-2000, the industry witnessed about 400 large and small mergers and acquisitions (M & A).
Consolidation and market dominance thus resulted in a decrease in competition. Major insurers dominate the major markets, rarely or never bothered to even the basic information to consumers, such as the performance of the health insurance policy, procedures to claim, the size of the provider network and cancellation procedures.
Moreover, in the absence of any reason to policyholders' costs, insurers went on increasing profits year after year. Recent economic data from HealthReform.gov showed that the profits of the ten largest insurance companies increased 250% between 2000 and 2009 - ten times faster than inflation. While the industry saw a lower enrollment (medical membership) as a result of the last recession, large insurers managed to remain profitable by increasing their premiums.
Looking at the other end of the spectrum, health insurers also benefited from a low occupancy in the midst of a recession. A high deductible and high out-of-pocket costs kept the cash-strapped Americans away from the clinics, leading to lower utilization of health care. A recent analysis by the Kaiser Family Foundation shows that people with insurance for medical checks less frequently chosen, the number fell sharply after the recession technically ended. The year 2011 saw suppressed usage trends with respect to historical levels.
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