Insurer Earnings Strong, But New Health Law May Take Toll
News outlets report on how the new health law may be affecting insurer earnings.
"As health insurers release earnings starting this week, the focus will likely be on clues as to how the U.S. health overhaul affects margins and growth," Dow Jones Newswires/The Wall Street Journal reports. "Led by managed-care bellwether UnitedHealth Group Inc. (UNH), the sector is seen posting hardy earnings for the second quarter. However, uncertainty over the specifics and ramifications of forthcoming overhaul regulations likely will leave investors nervous and stocks in flux. Investors worry that margins may be squeezed from new minimums on what companies must spend on medical costs. The changes also may force some players, especially smaller plans, to exit markets. The outlook remains hazy because the industry is awaiting key details of how insurers must calculate these minimum 'medical loss ratios,' which is the percentage of premium dollars used for patient care. Health plans that fail to spend enough on medical expenses will have to provide customer rebates" (Brin, 7/19).
The Associated Press: "Health insurer UnitedHealth Group said Tuesday its second-quarter profit jumped 31 percent as both enrollment and costs came in better than Wall Street expected. The insurer 'delivered another stellar quarter,' trumping Wall Street expectations in part because its enrollment and medical-loss ratio, which measures the percentage of premiums spent on medical costs, exceeded expectations, Sanford Bernstein analyst Ana Gupte said in a research note." But Citi analyst Carl McDonald says UnitedHealth's "profit margins likely will have to fall next year" when the medical loss ratio requirements are implemented" (Murphy, 7/20).