Managed care continues to grow profits

Sunday, November 9, 2003

November 10, 2003

NEW ROCHELLE, N.Y. - The managed care industry is poised for another year of strong gains in 2004, with profits projected to increase at least 16%, according to preliminary findings from The Outlook for Managed Care, 2004, a 120-page annual forecast from Corporate Research Group.

Managed care industry net income, including for-profit and not-for-profit health plans, is expected to be about $6 billion in 2004 on revenues of about $225 billion - representing a 2.7% net margin. Margins are expected to continue to expand in 2004 as the industry prices slightly above cost and as it wrings out administrative efficiencies through the implementation of new technology.

"Lingering concerns over rising costs haven't yet dampened the prospects of the nation's managed care plans," said Carl Mercurio, president and publisher of Corporate Research Group.

Other preliminary findings from the report, which is scheduled for release in December, are that commercial HMO premium rates will increase 13% in 2004, fully funded HMO and POS lives 1%, and revenues 14%. The increase in fully funded HMO and POS lives should be especially encouraging, given that membership has been declining since 1999. The study also projects continued gains in defined contribution health plans; albeit, the membership base remains small at just 350,000 nationwide as of year-end 2003.