Summary
The perfect storm for reform is intensifying. We have been here before, but multiple factors will likely force real reforms that will challenge managed care corporate profits and even survival. The PE 2008 ratios are out and the rate of decline is more concerning than falling numbers for Aetna, Amerigroup, Coventry, Health Net, Health Spring, Humana, Kaiser, United and Wellpoint. This “perfect storm” of federal debt, unemployment, record setting growth in Medicare eligibility, falling enrollments, adverse legal decisions like Ingenix, dramatically declining managed care company PE ratios, premium increases 500%+ CPI, and bipartisan political support poses real change to the status quo. The hidden tornado of concern lay in the acceleration of negative change.
Analysis
The tempest of newly eligible Medicare beneficiaries looks to be the primary driver of large scale federal intervention and spending. Certainly ERISA will be expanded by the administration to centralize federal authority, and public access to federally available plans.
Expect to see real reforms offering national programs that supersede NIAC for Individual and small Group insurance, and go beyond HIPPA protections to large Group coverage.
One thing is dangerously certain. If the healthiest Group lives get to switch to a better rate or federal plan, it will leave the sickest employees with the same plan and massively drive up experience rated premium in 1-3 years. If the opposite happens where only the sickest members get Federal insurance, it means massive new taxes in an era of record setting deficits. There is no free lunch. Both scenarios point to a society that does not want to continue paying for their runaway insurance premiums, and that could easily be relegated to accepting a National health plan.
We have been warning against the perils of unchecked medical cost-shifting from Medicare and Medicaid to the commercial life for some time. We are beyond the tipping point where premiums growth is unsustainable for many individual and small groups who continue to bare the brunt at 20% 2009 rate increases. New Medicare lives will stretch federal spending. Protecting medical plan access to the 45 million uninsured, and offering coverage without preexisting medical condition exclusion is the issue. The numbers tell us that large group plans have real difficulties. If our DC sausage maker blows the structure of protecting Individuals and Small Groups, it has real chance of bankrupting underwriting Large Group commercial plans.
