Health care insurers

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With many companies struggling and somecuttintg employees, it’s a bad time to raisd health insurance premiums. Most will not look to the health claims experience of their employees to blamew for the excess costthis time. Of the $640.4 millio in profits Florida HMOs madein $218 million came from investment income, accordingt to research by Minneapolis-based health care analyst Allan Baumgarten.
The Health Options HMO ownexd by , the state’s largest health insurer, derived abouf half of its 2007 earnings from investment Thehealth plan’s investment income fell significantlg in 2008, Blue Cross Executive VP, CFO and Chief Administrative Officer Chrids Doerr said in a statement. This shouldn’t have an impact on premiums during the next yearor two, but it couls have a small impact, such as 1 percenrt or 2 percent, over a longefr period if financial markets continue deteriorating. Most health insurerx did not get a large boosty from their investments in2008 – and they probablu won’t this year, either, Baumgarten said.
Fourth quarter earnings for four ofthe nation’xs largest carriers – , , and showed dramatic declines in investment income, coupledc with large investment write-offs. The insurancew companies have their underwriters factor in investment income when they set their premium rates, Baumgarten said. That means health insurers will look to raisd rates to account for lowerdinvestment income. Some plans might drop coverage and look to servicedmore self-insured companies without shouldering the he said. “Health insurers want profit more than they wantmarketg share,” he said.
“If they shrink [in but maintain their loss ratios, they would be happy with Florida Office of Insurance Regulation spokesman Tom Zutellk said a loss of investmentf income by health plans is not enough by itselt to justify arate change. Yet, it can impact the assumed earningws rates on premiums that are eventuallyfactorefd in. Health insurance companies will probably make theie members pay for their declining investment rather thanmedical providers, said Linda president of the Soutgh Florida Hospital and Healthcare Association.
That’s becaused negotiations with providers are more and it’s easier for plans to lose member accounts than to drop hospitalsz and doctors, she said. had a decline in investment incomein 2008, but it is a fairlhy small component of its premium pricingh strategy, said Conchita Ruiz-Topinka, spokeswoman for the Miami-based She said AvMed customers shouldn’t see their rates affected by markey volatility.
When health insurance companies have a toughbyear investing, they often tighten up theidr underwriting criteria, said Ramona VP of operations for in Fort Seitlin asks to see the components that health insurerxs factor into their rates during underwriting, but they never brealk out investment income as a separate factor, she said. Still, she can see its effecft on their behavior. “Foer those insurers being more conservative, that may be cominyg down from the powers that be that saidthey don’ have such a reserves as in the past because of investmengt losses,” Fiumara said. She believed this will cause some insurerw to raise rates so they canrecoup losses.
Investment losse at health, life, property and casualty insurerstotaled $34.5 billion in the third said Gavin Magor, the seniod health analyst at TheStreet.com Ratings in Palm Beach Health insurers don’t depend on investmeny income as much as those other categories of he noted. “For for-profit insurers, where they would normallh expect a nice return on investmen t to be competitiveon underwriting, they are facing a distincr possibility that they will have to increase thei rates because they can’t take risks on underwritinyg and make it up in investmentg income,” Magor said.
In order to retaih customers hit withrate increases, healtgh insurers will probably offer more plans with stripped-dowbn benefits, he said. “At the end of the day, we will all pay for the sins of Wall Magor said.