If health plan profits keep falling, selloffs may begin

Health plan profits are falling, and given the trends in the U.S. economy and healthcare costs generally, this trend is likely to linger for a while. And if falling profits remain a fact of life for the plans, it's likely to spawn a series of plan selloffs which will bring further consolidation to an industry that has already seen lots of large mergers in recent years, observers note. For the short term, some--like WellPoint--have kept their bottom lines healthy by raising premiums, but they can only do that for so long before employers drop them, experts say.

With returns on their investments dropping, medical costs climbing and membership falling, publicly-traded health plans have taken it on the chin. Though WellPoint did see an increase in earnings per share, every publicly-traded health plan saw profits fall in the third quarter. Many are telling investors to continue to expect bad times. For example, after third-quarter profits fell 39 percent, partly due to investment losses, Aetna has told its investors that it can't commit any longer to its long-term operating earnings per share growth goal of 15 percent.

So which plans will likely sell out to survive? Stock analysts say Los Angeles-based Health Net and Bethesda, MD-based Coventry Health Care are strong candidates, as they're struggling more than some of their competitors.

To learn more about the health plan business's status:
- read this AMNews piece

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