and record profits being earned by many MCOs, are likely create a backlash

Sunday, January 5, 2003

January 6, 2002

Report: Managed care era may be on last legs
HARTFORD, Conn. - The confluence of several factors is creating a "perfect storm" that will result in dramatic changes in managed care, according to a new report, "Managed Care Industry Overview" from Conning Research & Consulting, Inc.

"Higher premiums and record profits play well on Wall Street, but higher prices are causing employers to require higher premium contributions from employees or, in some cases, to drop employee health coverage entirely," said Robert H. Booz, Vice President, Health & Managed Care, Conning Research & Consulting. "To keep the percentage of uninsured Americans from rising, the government could take action."

Rising costs have forced many small employers to drop health insurance benefits and many employees to decline coverage, pushing up the number of uninsured, Booz said. ''Managed care has not demonstrated a prolonged ability to control expenses,'' he said.

As a result, the era of managed care may be passing, Booz said. ''This generation of products is nearing the end of its product life cycle,'' he said but added no good alternative has emerged.

Managed care, to its credit, has succeeded in eliminating unnecessary treatment from the system. But any reduction in utilization from now on will simply mean cutting into needed care, he said. ''Managed care has brought us to a plateau,'' Booz said.

Given such developments, greater government intervention is likely, the Conning study states.

Booz considers new legislation addressing health care access and affordability more likely as a result of the make-up of the new U.S. Congress. Resistant to a broad health care initiative from Democrats in the early 1990s, the American public, health care providers, and the insurance industry may be more receptive to incremental plans proposed by the Republican-controlled Congress.