For the first time in a decade, health insurers' medical expenses declined in 2010. That's good and bad news: it will help increase profits and also pressure them to decrease premiums.
Based on a study of 852 health insurers, Weiss Ratings expects medical expenses for 2010 will decline as much as $9.8 billion, or 3 percent. Overall, health insurers paid $234.9 billion for medical expenses for the first nine months of 2010, representing a $3.7 billion, or 1.6 percent, decrease from the same period in 2009, according to Insurance and Financial Advisor.
In contrast, the study found that from 2005 through 2009, the industry's medical expenses rose 48 percent, representing an average annual increase of 10.3 percent, with double-digit increases in three of the four years. Among the 852 companies studied, 45 percent experienced a decline in medical expenses during the first nine months of 2010, while 55 percent experienced increases.
"This is a critical change from the steady and rapid increases of prior years," Gavin Magor, senior insurance analyst for Weiss, told CNN Money. "If it continues in 2011, it should help boost health insurer profits while also pressuring them to curb premiums."
Of the insurers reporting a decline in medical costs, Aetna's medical expenses fell by 14 percent in the first nine months of 2010 vs. the same period last year, notes CNN Money.
Weiss also found that health insurance enrollment in the U.S. declined to 145 million on Sept. 30 from 148.4 million a year earlier, South Florida Business Journal reports.
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