Since the Department of Health and Human Services issued its rule on medical-loss ratio (MLR) requirements, it seems insurers haven't fared too badly as stock prices went up after the rule was released.
Shares of WellPoint (NYSE: WLP) climbed $1.09, or 1.9 percent, to $59.70. Aetna (NYSE: AET) shares rose 33 cents to $30.97 and UnitedHealth Group (NYSE: UNH) increased 23 cents to $36.23, according to Blooomberg Businessweek.
The issuance of the regulations "removes a policy overhang and is somewhat more positive than expected," Stifel Nicolaus analyst Thomas Carroll told the Wall Street Journal. In the longer term, MLR minimums will be "mostly manageable" by the industry, "but near-term transition to the new regulations will create uncertainty and volatility," particularly because of the strong role states will play in implementing the regulations, he said.
Deutsche Bank analyst Scott Fidel said the regulations provide increased visibility for commercial managed-care companies, "and it is encouraging that HHS did not make any new negative changes," notes the WSJ.
"We think the rules are manageable, and that's really the take home message," Miller Tabak analyst Les Funtleyder told Blooomberg.
The cost analysis of the rule suggests that once the allowed adjustments are applied, most insurers will make the target, with the average MLR in the individual market being 86.5 percent and 90.8 percent in the small group market for 2011. MLRs will also increase going forward. Insurers will face a cost of about .02 percent of total premiums for the one-time costs gearing up for the rule and .01 percent of total premiums for annual compliance costs, according to the Health Affairs Blog.
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