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Zacks Industry Outlook Highlights: Aetna, WellPoint and CIGNA - Press Releases

For Immediate Release

Chicago, IL - December 16, 2011 - Today, Zacks Equity Research discusses the Health Insurance, including Aetna Inc. ( AET ), WellPoint Inc. ( WLP ) and CIGNA Corp. ( CI ).

A synopsis of today's Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/66399/Health+Insurance+Stock+Review+-+Dec.+2011

Over the past 10 years, health insurance premiums have persistently increased, outpacing the growth of wages and cost of living. The surge in premiums -- due mostly to complex connections among health insurance companies, health care providers, pharmaceutical manufacturers and the medical technology industry -- has been witnessed in both employer-sponsored insurance as well as individual insurance.

Total premiums for employer-sponsored insurance doubled in the 1999-2009 period. The individuals market also saw rapid growth in the cost of premiums. Insurance companies have also been known to denying coverage because of pre-existing conditions, and for charging higher premium in the individual market.

Increasing industry consolidation also left lesser insurance choice for Americans, who were reeling under rising health care costs. Since 1996, the industry has witnessed acquisitions worth about $90 billion, resulting in dominance by just a few players.

Consolidation and market dominance consequently led to a decline in competition. Big insurers dominating large markets hardly ever bothered to provide even the basic information to consumers, such as the performance of health insurance policies, procedures to claim, the size of provider network and cancellation procedure.

Moreover, in the absence of any reasons or incentives to lower policyholders' cost, insurance companies went on making increasing profits year after year. According to HealthReform.gov, profits of the ten largest insurance companies increased 250% between 2000 and 2009 -- ten times faster than inflation. Though the industry saw lower enrollment (medical membership) due to the latest recession, major health insurance companies managed to remain profitable by increasing their insurance premiums.

Looking at the other end of the spectrum, health insurance companies also benefited from low utilization amid recessionary conditions. A high deductible and high out-of-pocket cost kept the cash-strapped Americans away from the clinics, leading to lower utilization of health care services. A recent analysis from the Kaiser Family Foundation revealed that even people with insurance are opting for medical checkups less frequently, with the number actually dropping most dramatically after the recession technically ended. Patients made 17% fewer doctor visits in the second quarter of 2011 than in the second quarter of 2009.

Over the past couple of years, lower utilization has played a very prominent role in helping the profitability of the major players in the health insurance sector. Most of the carriers continued to beat earnings estimates in recent quarters, benefiting from lower claim payments.

According to insurance majors like Aetna Inc. ( AET ), WellPoint Inc. ( WLP ) and CIGNA Corp. ( CI ), medical utilization trends haven't moved much. Since these insurers hold major market share, any indication from them confirms the fact. But, some uptick in utilization rate can be expected in data for the final quarter of the year as policyholders try to go for the long delayed checkups.

However, low medical utilization is a short-term factor affecting the industry. Over the longer term, issues including the effects of health care reform and negative economic consequences will reshape the industry.

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AETNA INC-NEW ( AET ): Free Stock Analysis Report

CIGNA CORP ( CI ): Free Stock Analysis Report

WELLPOINT INC ( WLP ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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