Last week we released the first of our Verden Rankings, reporting on how well or poorly insurers are managing their networks from a provider point of view. The higher the score, the more likely it was that the insurer engaged in reimbursement-cutting and/or cost increases to providers. Humana obtained the highest score and so was rated as the worst network of those ranked in Q1.
It is not surprising, therefore, to read today that Humana posted higher profits of 12.5% for the first quarter, 2008. While MarketWatch reports that ‘Humana Inc. on Monday posted a rise in first-quarter profit and revenue — thanks in part to a lower-than-expected effective tax rate — and the health-care benefits firm lifted its annual forecast, helping to lift the company’s shares’, the report further states ‘Humana said its medical cost ratio for Medicare accounts climbed 0.7% to 90% during the quarter, but it was offset by a 2.6% drop in commercial accounts to 76.8%. That resulted in a slight dip in overall medical cost ratio to 86.7%’.
And there’s the kicker folks – Humana managed to hold on to 2.6% of commercial premium dollars rather than pay it out to providers for services rendered. How did they do it? Through all of the policy changes we neatly tracked through the Verden Alert system and converted to rankings at the end of the quarter. The correlation between our rankings and their financial performance is no coincidence.
Meanwhile Aetna, the lowest scoring and therefore best provider network, took a hit with its profits slipping for Q1. MarketWatch notes that even though membership numbers are up, ‘Aetna’s medical-cost ratio took a bite out of earnings, rising to 81.3% from last year’s level of 80.7%. Commercial cost ratios stayed relatively flat, inching up to 79.8% from last year’s 79.6%’ . Again, it’s no coincidence that the Verden rankings winner is the one that reported medical cost ratios increasing.
United Health’s networks – AmeriChoice, UnitedHealthcare and Oxford – ranked 3rd, 4th and 10th worst respectively. UHN, releasing its financials the day after our ranking report, reported that ‘for the first quarter, UnitedHealth’s commercial medical cost ratio also climbed to a rate of 81.5%, up from 81.2% in 2007’. That means the company paid out more of the premium dollars they brought in than they would have liked. Chief Executive Stephen Hemsley stated ‘These financial results are not acceptable for a company with our capabilities and potential.’
So watch for things to change in these networks rapidly in Q2 and Q3. Network providers are likely to be hit hard in the coming months in order to compensate for it. Will UnitedHealthcare be the number 1 ranked worst network by end of Q2? We’ll have to wait and see . . .