Positive Health Insurer Earnings Forecasts Could Foreshadow Cost Leveling

April 18, 2003 (PLANSPONSOR.com) - At least a small spot of sunlight may have opened up in what have been dark and threatening storm clouds over the nation's health care system.

Announcements from three health insurers that they were setting aside more cash than needed to pay for doctors, prescription drugs and hospital stays and moves by two of the three to raise their earnings forecasts may signal that skyrocketing health costs are starting to level out, Reuters reported.

That would certainly be good news for employers who have taken a shellacking in recent years by increases in the cost of providing health coverage to workers and retirees, causing many to cut back on coverage or increase their cost-sharing efforts with employees. Health insurance prices soared 12.7 % in 2002, the biggest spike in a decade. Experts see 2003 as the third straight year of double-digit jumps in costs.

In addition to the much-welcomed word that Anthem, PacificCare Health Systems, and United Health Group were generating enough revenue that they could set aside more than they needed for immediate treatment costs, Pacific doubled its first-quarter profit projections. Anthem raised its first-quarter forecast from $1 to $1.05 per share to $1.18 per share.

“It’s really good news for the system if there is a leveling off, and also for the profitability of insurers,” Paul Ginsberg, president of the Center for Studying Health System Change in Washington, told Reuters.

UnitedHealth Chief Executive William McGuire said overall medical costs would likely come in lower than expected this year, citing patent expiration of pricey prescription drugs like the popular allergy drug Claritin.