This is going to be painful and demoralizing reading.
Health insurer profits are dropping--alot. This means you and I (though not our elected officials), could will be facing sharply higher premiums, higher deductibles, higher co-pays, and more denied care--all in the name of restoring profits to the insurance industry. It also means many cash-strapped Americans, facing unemployment or certainly less disposable income, will drop their already unaffordable insurance.
Shares of WellPoint (WLP: 46.45, 0.81, 1.71%) sank 28% Tuesday after the nation's largest insurer by membership cut first-quarter and full-year earnings estimates. The profit warning quickly spread to other health insurers.
http://www.smartmoney.com/...
With sharply escalating energy costs and home mortgage loans adjusting to new heights of unaffordability, sadly, middle-class Americans will have no choice but to draw the line on health care. They will join the ranks of the 47 million uninsured, and drop their insurance.
How bad will it get? Very, very bad, I believe.
Where is our government? What are they doing about this national catastrophe? N.O.T.H.I.N.G.
And now, our two Democratic candidates are locked in face-to-face trench warfare which predictably, is not addressing the dire domestic threats facing all of us.
Why is this happening?
Traditionally in a recession, healthcare and healthcare related equities have performed well. This time, it appears that despite a weakening economy, healthcare utilization is up. Here's what's really depressing to contemplate. Some analysts believe that Americans are using the healthcare system more than ordinary because they know they will lose their jobs and then have no health insurance. Hence, the medical loss ratio is increasing.
WellPoint Chief Executive Angela Braly said on a Monday evening conference call that medical costs for 2008 were running higher than expected.
"Specifically, medical cost trends in our commercial business are running higher than we previously expected, and we now expect 2008 medical cost trends for our local group and individual fully insured business to be in the range of 8%, plus or minus 50 basis points," she said.
http://www.smartmoney.com/...
The medical loss ratio is the percentage of premium dollars that an insurance company pays out in claims. The less they pay, the better it is for them. This is the name of the game. This is also why an insurance company is in business to take our money, then deny our claims. You and I, in insurance industry lingo are "losses". And currently, the medical loss ratio is going up. This is not what a for-profit health insurer wants. They've got to recoup this profit, and guess who's gonna pay? You and me.
Other insurance giants are also in the crapper.
In the wake of the late Monday report, shares of many of the major health care companies dropped significantly.
After the announcement, Wellpoint's shares fell 28 percent, to close at $47.26, down from Monday's closing price of $65.92.
Minnetonka, Minn-based UnitedHealth (NYSE: UNH), the parent company of Cypress-based Pacificare, closed at $38.24, down 15 percent from yesterday. Stocks of other insurers also fell Tuesday.
Aetna (NYSE: AET) stock fell by 8 percent to close at $42.65. Humana (NYSE: HUM) stock closed at $47.38, a 24 percent decrease.
http://losangeles.bizjournals.com/...
Again, I ask, where is our government?
The other day, Dburn made the following comment in one of the health catastrophe diaries. It fairly summarizes what will happen as health insurance premium renewal notices go out to the Americans who still able to buy junk insurance.
Word of warning about rates
I put a diary length post about floats yesterday. One of the many reasons Health Insurance delay or deny payments, as much as 35% and possibly more of their earnings comes from the float . Looking at UnitedHealth's Cashflow statement, I saw 1.58 Billion in "Investments" as a deletion from cash or their ability to pay claims
I notice today that Health Insurance stocks took a beating way above the average's declines. There is a belief that many of the Insurers may have invested
the float in many of the sub-prime securities or even just the stock market. This was discussed as far back as 1995 in the New Your Times.
What does this mean to us? Massive rate increases. I Suspect those who haven't been priced yet this year will see 20% or more. It won't be limited to a single insurance company. They all took a beating today. I think it may just be a start. If you are in the market and want to try to hedge your Insurance, it might be worthwhile to short these guys if you have some cash you can afford to do without.
Citibank just went below book value today. They've lost over 200 Billion for their shareholders. No one is sure how much of these Enron like securities they are underwater on are being held off their balance sheet. They are talking about a 18 Billion write off this quarter.
If the Insurance companies start warning about earnings, that might be a signal to buying a few ETFs that short the sector . They are probably losing money on their float which is hurting earnings.
by Dburn on Mon Mar 10, 2008 at 01:50:03 PM PDT
Things are not good, dear friends. Maybe the system needs to quite literally crash and burn, which is exactly what could be happening, for the American people to take charge of our government.
I want to leave you with the words of Matthew Holt, one of my favorite health policy bloggers.
Here's what he says about what could be the end game for the for-profit insurance industry.
HEALTH PLANS: Time to cut a deal?
There's carnage amongst health insurer stocks on Wall Street this morning. For a long while I've been saying that the health insurer party was too good to last and in the past year things have certainly cooled down. Hanging over the industry has been an inability to extend itself further into the commercial market (commercial enrollment has been flat over the course of the boom—and now we’re going into a recession) and of course the lingering concern that payments for Medicare enrollment will be cut at some point.
Last night Wellpoint had at least the first shoe drop when it announced that a combination of higher medical costs and lower than expected enrollment would mean that it was going to miss its profit numbers. The stock is off more than 25% and most of the rest of the sector is well off too. Now this wasn’t a huge cut in the numbers—the reduction in forecast profits is under 10%. But Wall Street as you know hates the concept that earnings will diminish, and Wall Street doesn’t understand health care anyway.
Wall Street likes earnings machines that continually increase profits. To be such an earnings machine that you need to be able to sell an increasing number of widgets to the same people, or widgets to new people, or raise the price of the widgets you’re selling to the same people. Health plans can’t really do the first. They have done the second only because of massive subsidies in the Medicare market since 2004 and they look like they’re running out of steam in doing the third—although it’s been a darn good run! (Medical loss ratios are higher on on a base of greater overall revenue than they were 5 & 10 years ago, but that can’t go on for ever and that appears to be where the problem this morning lies).
And of course the political pressure on all the ways health plans make money continues to grow. Those games in the individual market are being found out, the games with opaque pricing are being investigated as consumer fraud, and although they’ve staved off Medicare private payment cuts for now, that issue isn’t going away.
So perhaps it’s time for health plans to consider their potential future as a regulated industry—one that will be forced to compete on issues that actually matter for the good of the health care system and the nation. And perhaps it’s time to prepare to really cut a deal on that, rather than propose a fake plan that takes but doesn’t give.
Now, there’s no way that under such an approach insurers will be allowed to make the kind of profits they’ve seen over the last five years, and of course Wall Street will freak out. But then again, perhaps there’s no time like the present to tell Wall Street the really bad news.
[emphasis added]
http://www.thehealthcareblog.com/
So when the corporate owned media finishes pursuing Eliot Spitzer's prostitute through the streets of New York, maybe they will turn their attention, at least for a minute or two, to the healthcare catastrophe. This apocalypse, I believe, is on the verge of becoming our next Greek tragedy.