Image: kevinzhengli under CC 3.0
According to financial analyst Sarah James, the health insurance industry is a great investment. Profits are estimated to be higher in the third quarter of 2010, so firms like Aetna, Coventry, UnitedHealth, WellPoint, and Humana have had their price targets increased.
Unfortunately, what is positive for stockholders may not be as good for health insurance plan customers. One of the reasons for lower costs is a milder flu season than expected, which is obviously good for everyone. Increased enrollment is another explanation, which is generally neutral. Another, more worrying, factor is price increases.
Lower usage rates of costly inpatient hospital services could go either way: if the decline is because patients are truly becoming healthier and don’t need them, that’s great. However, if it is a result of insurers forcing patients into outpatient care before they are ready to cut their costs, it is not a good sign for consumers.