The July 23 New York Times reported that three Harvard professors, David M. Cutler, David Blumenthal and Jeffrey Liebman, estimated that savings of $200 billion could be achieved through presidential candidate Senator Barack Obama’s proposed health care plan. As analysts with an interest in administrative expenses this caught our attention because it seems to conflict with what we believe we know about health plan administration.
Average health plan stocks increased 11.9% for the month of July. Valuation indicators increased last month. Since nine of the fourteen plans reported earnings last month and all reported improved performance, it is reasonable to assume the 11.9% increase in stock price was driven by a more optimistic outlook. On the other hand, the market as a whole decreased by 1.0%.
Nine of the fourteen publiclytraded health plans announced earnings last month. Aetna had strong growth in Medicaid membership leading to a 17.7% increase in premium PMPM. AMERIGROUP Corporation experienced a 12.7% increase in revenues in part because of a 12.6% increase in membership. Centene had a 97.0% increase in operating income because of higher margins. Coventry Health Care had strong growth in Medicare Advantage membership, which led to an increase in revenue of 27.7% despite margins falling. HealthSpring reported an 81.8% growth in operating earnings on a 49.2% increase in revenues. Molina Healthcare reported a 52.8% increase in operating income, due to growth in revenues and lower HBR. UnitedHealth Group reported a decrease in net income of 32.4%, as HBR increased. Universal American Corporation experienced an explosive growth in Medicare part D membership to 1.8 million due to its acquisition of Community CCRx (SM) prescription drug plan in September 2007. WellPoint, Inc. experienced declining operating and non-operating income due to a higher HBR, which decreased net income by 10.1%.
AMERIGROUP Corporation’s, AMERIGROUP Tennessee, renewed its contract with the state of Tennessee through June 30, 2009. WellCare Health Plans, Inc. filed an 8-K with the SEC on July 21st stating its Board of Directors decided to restate its historical consolidated financial statements for the fiscal years ended December 31, 2004, 2005, and 2006, and for the three-month periods ended March 31, 2007 and June 30, 2007.
The acquisition between Centene Corporation and Celtic Group, Inc., closed July 1st.
Aetna, Inc. has announced Michael Mathias as Vice President and Chief Technology Officer. Centene Corporation has named Steve A. White as President and CEO of Buckeye Community Health Plan, Centene’s Ohio subsidiary, and Jeffrey Schwaneke, CPA, as Corporate Controller for Centene Corporation. Humana, Inc. appointed Christopher Todoroff as Senior Vice President and General Counsel. Molina Healthcare, Inc. announced Glen H. Bogner as president of Molina Healthcare of Washington, and Charles A. Coonradt as Executive Vice President. MVP Health Care has appointed Christopher Henchey as Executive Vice President and Chief Operations Officer of the company. SCAN Health Plan announced that Arthur Henkel will be Vice President of mergers and acquisitions. Touchstone Health HMO, Inc. recently named Penelope Kokkinides as Chief Operating Officer. On July 31st, UnitedHealthcare, a division of UnitedHealth Group, announced Kathryn Sullivan joined UnitedHealthcare as CEO, Central Region, and Jeff Lucht joined as Senior Vice President. Steven Nelson, president of AmeriChoice, was appointed as CEO of UnitedHealthcare’s West Region. WellCare Health Plans, Inc. announced that Jonathan P. Rich has been appointed to Senior Vice President and Chief Compliance Officer and Thomas L. Tran to Senior Vice President and Chief Financial Officer.
Independent / Provider-Sponsored plans experienced a decline from the 11.8% increase last year per member per month (PMPM) to 4.9% this year. In this month’s analysis, we look at the administrative expenses of Independent / Provider-Sponsored plans as reported in the Sherlock Expense Evaluation Report (SEER).
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