Summary
Ongoing healthcare inflation at 200-400%/yr of CPI has surpassed the point where employers can easily compete with international products and services. We are already seeing growth in Scheduled Medical Benefits, which are a poor substitute - but do substitute for traditional major medical insurance where employers want to offer a gift of insurance. Providers are actively suing insurers for their billed charges, and insurers are actively moving to the Medicare fees schedule to lower their costs - some successfully and others not. The Medicare Advantage (PPO, HOM, POS and PFFT) plans with and without Part D pharmacy have many carriers attempting to develop new markets. The 10-15% fall in the stack market will cause increased pricing of insurance because of poor insurance company investment returns. The biggest wild card is forecasting what commercial class of insureds our government will subsidize in the new Presidency.
Analysis
As prices increase, we would expect further migration away from employer sponsored commercial insurance, and increasing competition for fewer lives which tends to reduce prices and therefore profits on the large group accounts.
As far as the Part D profitability is concerned, the proof is in seeing a plan that actually covers brand name drugs in the donut hole, and that is rated for profit within well (sales, mail order and pharmacy) defined distribution network(s).
The end game here depends on where we focus on commercial group, individual commercial or individual Medicare lives. Certainly opportunities exist with medicaid and dual eligible too . If history repeats itself, we will see double digit price increases in the individual commercial market, and steep competition for the group market at more moderate price increases. The Medicare Advantage market is fixed with plans A-L and depend more on the provider network for growth. Same would hold true for Medicare Supplemental.
Lastly, Where HMO's can get medical provider networks to take a capitation - they would guarantee a profit by downloading medical costs risk tot he providers.
