A.M. Best Special Report: Companies Pressured by Higher Claims, Expense and Debt Ratios.OLDWICK, N.J. -- Managed care companies' earnings fell year over year by 27.5% in the first six months of 2008 and should remain under pressure over the near term. Earnings have been impacted by factors ranging from increases in the number of higher dollar claims and claims severity to rising outpatient outpatient /out·pa·tient/ (-pa-shent) a patient who comes to the hospital, clinic, or dispensary for diagnosis and/or treatment but does not occupy a bed. out·pa·tient n. utilization and a severe flu season
* The medical loss ratio rose 180 basis points to 84.3%, partly because more companies are shifting their business mix to Medicare and Medicaid Medicare and Medicaid U.S. government programs in effect since 1966. Medicare covers most people 65 or older and those with long-term disabilities. Part A, a hospital insurance plan, also pays for home health visits and hospice care. , which tend to have higher costs and higher loss ratios. * The administrative expense ratio rose by 70 basis points to 17.1% as some companies integrated recent acquisitions. * Overall enrollment grew year over year by 6.2%. However, rates of growth for some companies were below the overall average because of pricing actions in the group, commercial or individual business lines. * Enrollment growth for Medicaid-only carriers outpaced the overall average. Other companies, though, have exited from Medicaid programs in specific states, or plan to, because of concerns over profitability and premium rates. * The average debt-to-capital ratio rose to 33.8% as of June 30, 2008, up from 25.7% the prior year as companies issued more debt and shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. fell because of share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. programs. BestWeek subscribers can download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. a PDF (Portable Document Format) The de facto standard for document publishing from Adobe. On the Web, there are countless brochures, data sheets, white papers and technical manuals in the PDF format. copy of all full special reports or a combination of the report and all related spreadsheet files of the report data at no charge at www.bestweek.com. Nonsubscribers can visit www.bestweek.com for pricing information or call customer service for more information at (908) 439-2200, ext. 5742. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com. |
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