iProtean—Investors Expect Insurers to Benefit from Health Reform

Stock prices for large publicly traded insurance companies have risen in recent weeks, signaling investors confidence that health reform will improve insurance companies’ bottom lines despite dire warnings from the industry itself.


America’s Health Insurance Plans, the industry’s trade group, has been predicting a troubling if not catastrophic outlook for insurance companies. It cited CMS’s 2015 rate reductions for Medicare Advantage plans (although the cuts are expected to be lower than anticipated). But stock prices for the five insurance companies with the largest number of Advantage enrollees have risen by at least 6 percent over the last several weeks—two of those have seen double digit increases. (“Health insurance stocks are hot, despite chilly predictions,” Modernhealthcare.com, March 21, 2014)


In addition, some of these companies have also done very well on the health insurance exchanges. The market leader, Wellpoint, had anticipated that 80 percent of its exchange enrollees would make their first payment on time, but that has risen to 90 percent in recent weeks. (“Health insurance stocks are hot, despite chilly predictions,” Modernhealthcare.com, March 21, 2014)


This financial strength positions large insurers for additional endeavors in regional markets.  iProtean’s upcoming course, Strategic Responses to the Competitive Market, has a segment on the impact of insurers on the competitive environment (excerpted from the course):


“As hard as hospitals, physicians and other providers are working to determine what they need to do position themselves competitively, health insurers have been spending at least as much effort, if not more, on determining the implications of the health reform law. The way markets are evolving really is a function of what both the health plans of the insurers and the providers are doing. This is very much an iterative process and a “back and forth” as each tries to figure out the implications of the strategies others in the market are adopting so they can develop their own strategies. That is, each can and will be influenced or shaped by what the other is doing.


“So if you have a very aggressive health system adopting a forward-thinking accountable care strategy, essentially moving closer and closer to the insurance business, perhaps even setting up its own health plan, a major insurer is going to look at that very carefully and it could help inform and determine their competitive response. Likewise, if you have a marketplace where the insurer really wants to adopt aggressive health exchange strategies, they will expect the hospitals and doctors to provide even deeper discounts to be part of a limited network or panel that is tied to their particular insurance product.


“Insurers really can have a very significant impact in shaping the market, but it isn’t one-dimensional. It also is very much a function of where the hospitals and the physicians are in the marketplace as well. These two forces are both in play and are serving to define exactly how markets unfold and how they are going to look.”



iProtean subscribers, a new advanced Finance course, Strategic Responses to the Competitive Environment featuring Michael Irwin and Dan Grauman, will be the next course in your library. Topics include: payment innovations and increasing competition, the continuum of competitive strategies, four competitive models, the risk of being “cautions” and capital requirements.


For a complete list of iProtean courses, click here.


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