Managed care premiums to jump another 12-13%

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Sunday, May 4, 2003

May 5, 2003

BALTIMORE - Look for managed care companies to raise premiums by 12-13% in 2003 while medical costs keep pace at 11-12%.

These estimates, published in March by CMS in another installment of its ongoing ‘Market Update’ series, continue an upward trend that began conservatively at 2% in 1997 and hit double-digit growth in 2001. Last year premiums rose 12.7%.

While profits margins publicly traded managed care companies declined from 1994 to 1999, they have climbed from 1.8% in 1999 to 4.4% in 2002. Since a three-year upswing in the underwriting cycle is expected to continue, industry analysts expect see profits climb still higher for payers.

“Strong pricing and a slowdown in health spending inflation should lead to record profits in 2003,” according to Charles Boorady, an analyst at Salomon Smith Barney who is quoted in the CMS report.

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