Administration April 11, 2003

Health Insurance CEOs See Changes in Sector

November 28, 2001 (PLANSPONSOR.com) - Three-quarters of CEOs at health insurance companies expect significant changes in the competitive structure of the industry, a new survey by Tillinghast - Towers Perrin finds.
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The survey, titled 2001 CEO Survey of the US Health Insurance Industry, also revealed that 65% of the respondents anticipate significant activity in terms of mergers and acquisitions.

The study asked CEOs to list the areas in which their companies must excel in order to prevail over the next few years.

· more than half the CEOs surveyed cited medical management,
· improving provider relations was identified by 43%,
· changing to meet market/customer demands was cited by 40%,
· keeping abreast of legislative/regulatory issues was listed by 36%, and
· technology management was named by 34%

And while executives at health insurance companies are quick to name the short-term obstacles facing their sector, only one-third are confident in their company’s ability to face the challenges ahead. The most significant obstacles to success, as identified by the CEOs, include:

· the restrictive regulatory environment, specified by 47%,
· technology limitations, cited by 38%,
· resistant internal culture, mentioned by 34%,
· poor provider relations, cited by 23%, and
· difficulty integrating resources, mentioned by 23%

To tackle these problems and improve their competitive positions, the CEOs surveyed will take the following steps:

· some 43% will invest in technology
· almost 40% will improve customer service, and
· almost 30% will enhancing medical management

Product Line

In terms of products offered, the survey found that:

· while only 10% of the companies surveyed presently offer defined contribution products,
· some 47% more plan to do so by 2005,
· a further 21% of respondents plan to add long-term care to their product mix, and
· another 18% will begin offering Medicare Supplemental products.

According to the survey, some 78% of the sample expects this product diversification will increase industry profitability, with which almost a third of respondents are currently dissatisfied.

Increasing profitability will be problematic, with most executives wanting to cut costs on the one hand, while 39% wish to increase compensation for their employees.

Survey Stats

The study polled 88 CEOs representing the four primary health insurance industry segments:

· health maintenance organizations,
· Blue Cross and Blue Shield plans,
· health insurance companies with significant group health business, and
· preferred provider organizations

– Camilla Klein                           editors@plansponsor.com

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