The health insurance industry has confronted many external challenges in the recent past, such as rising costs, a shortage of primary care physicians, uncertain political and regulatory environments, a shifting customer mix anda struggling economy, just to name a few. However, the final ruling of the Supreme Court on Health Care Reform last month has resuscitated the industry
Meanwhile, the industry continued to remain profitable, with the top six players -- UnitedHealth Group Inc. (UNH - Analyst Report), CIGNA Corp. (CI - Analyst Report), WellPoint Inc. (WLP - Analyst Report), Aetna Inc. (AET - Analyst Report), Humana Inc. (HUM - Analyst Report) and Coventry Health Care Inc. (CVH - Analyst Report) -- reporting year-over-year earnings growth for the full year 2011.
Despite rapidly growing spending on health care over the past few decades, the health insurance industry has been characterized by growing premiums, limited policy choice and lack of transparency.
Health insurance premiums have increased consistently, outpacing the growth of wages and cost of living.
Increasing industry consolidation also limited insurance choice for Americans, who were reeling under rising health care costs.
Moreover, in the absence of any reason to lower policy-holder costs, insurance companies went on making increasing profits year after year. Data from HealthReform.gov showed that the profits of the 10 largest insurance companies increased 250% between 2000 and 2009, ten times faster than inflation. Though the industry saw lower enrollment (medical membership) due to the latest recession, major health insurance companies managed to remain profitable by increasing their insurance premiums.
[u said:must read[/u]"]Looking at the other end of the spectrum, health insurance companies also benefited from low utilization amid recessionary conditions. A high deductible and high out-of-pocket cost kept cash-strapped Americans away from the clinics, leading to lower utilization of health care services. An analysis by the Kaiser Family Foundation revealed that people with insurance opted for medical checkups less frequently, with the number dropping dramatically after the recession technically ended.
The year 2011 saw suppressed utilization trends relative to historical levels. This trend, witnessed over the past couple of years, has played a prominent role in helping major players in the health insurance sector to earn significant profits. Most of the carriers continued to beat earnings estimates,