Health insurers in 2012 will continue to focus on complying with the many provisions of the federal health reform law affecting their business. They will also be keeping an eye out for strategic acquisitions that put them in the best position to meet the ongoing changes to the healthcare system.
“Reform is the first thing on everyone's agenda,” says Doniella Pliss, senior financial analyst at A.M. Best Co. “As of now, this is the law. They will be ready to be in compliance.”
Health insurers will continue to be involved on a state level in the development of health insurance exchanges, which are slated to go online in January 2014 under the Patient Protection and Affordable Care Act. It's still uncertain that all participating states will meet this tight time frame. Only about a dozen states have enacted legislation creating the online marketplaces where individuals and small businesses will be able to buy insurance. Insurers must decide well ahead of 2014 whether to participate in the exchanges, and states will begin certifying health plans as early as fall 2012.
Insurers will decide whether to participate in accountable care organizations around the country and experiment with these local programs in which providers share savings for more coordinated care.
On the technical side, insurers face ICD-10 compliance deadlines, Pliss says.
Consumer utilization of health services has been down for the past three years, but some health insurers, including UnitedHealth Group, the largest insurer by revenue, are predicting an increase in utilization on the outpatient side in 2012.
As the baby boomers continue to age, insurers in the senior market will enjoy higher enrollment, Citigroup senior analyst Carl McDonald says in an investor note. “The Medicare Advantage industry will see a nice bump in the number of seniors turning 65” this year, McDonald wrote. “The Census Bureau estimates that more than 3.3 million people will turn 65 in 2012, up from almost 2.8 million people in 2011, an increase of around 560,000 lives.”
Publicly traded insurers will be looking for more strategic investments, including aligning themselves more closely with providers, analysts say.
“The cash the publicly traded insurers have accumulated is unprecedented,” Pliss says. “They are sitting on piles of cash. They are willing to do deals, but whatever comes up for sale, valuations will go up. And insurers will have to consider capital needs for 2014 to meet mandates of health reform.”
