SOURCE: Weiss Ratings

Weiss Ratings

February 14, 2011 09:29 ET

No Rise in Health Insurer Medical Costs for First Time in 10 Years, According to Weiss Ratings

JUPITER, FL--(Marketwire - February 14, 2011) - For the first time in ten years, the U.S. health insurance industry is expected to report no rise in medical expenses, according to a new study of 852 health insurers by Weiss Ratings, the nation's only provider of independent insurance company ratings.(1)

Overall, health insurers incurred medical expenses of only $234.9 billion in the first nine months of 2010, representing a $3.7 billion, or 1.6%, decrease from the $238.6 billion in medical expenses reported during the same period in 2009.

Moreover, based on this trend, Weiss Ratings estimates that medical expenses for the entire year will decline as much as $9.8 billion, or 3%, from $323.1 billion in 2009 to $313.3 billion in 2010.

"This is a critical change from the steady and rapid increases of prior years," commented Gavin Magor, senior insurance analyst for Weiss Ratings. "If it continues in 2011, it should help boost health insurer profits while pressuring companies to curb premium increases and give consumers some much-needed relief."

Health insurers incur medical expenses whenever they pay out health insurance claims, a cost that represents around 71% of their total expenses.

Supporting its conclusions regarding the importance of this trend change, the study also found that:

1. Medical expenses increased sharply in prior years: From 2005 through 2009, the industry's medical expenses rose 48%, representing an average annual increase of 10.3%, with double-digit increases in three out of the four years.

2. Total enrollment declined slightly: The total number of individuals enrolled in health insurance was 145.0 million at the end of the third quarter, compared to 148.4 million one year earlier.

3. The decline in medical expenses was reported by many companies: Among the 852 companies studied, 382, or 45%, experienced a decline in medical expenses during the first nine months of 2010, while 470, or 55%, experienced increases.

Below are some of the large health insurers reporting significant increases or decreases:

Medical Expenses of Large Health Insurers
(with $500 million or more in medical expenses and
an increase or decrease of 10% or more)
Company State   First 9 Months of 2010
  First 9 Months of 2009

Insurers with large medical expense decreases:
Aetna Health Inc. (a NJ corp.) NJ   1,090.9   1,270.2   (14.1)   B+
QCC Insurance Co. PA   1,642.2   1,910.4   (14.0)   B-
Keystone Health Plan West Inc. PA   1,509.7   1,699.0   (11.1)   A-

Insurers with large medical expense increases:
United Concordia Companies Inc. PA   500.0   359.0   39.3   A-
Group Health Inc. NY   2,418.2   2,079.7   16.3   C
Blue Cross of Idaho Health Svc ID   746.2   661.0   12.9   A+
Weiss Ratings scale: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak

Companies with lower costs tend to have better profits and a better opportunity to build or maintain their capital. However, this is just one of many factors contributing to a company's overall financial health, and consumers are advised to always seek to do business with companies meriting a Weiss Rating of B+ (good) or better.

To help consumers avoid the weakest health insurers and find the strongest, Weiss Ratings provides lists of the 222 strongest and 140 weakest health insurance companies. Consumers can immediately receive both lists at no charge by providing their email address at

About Weiss Ratings

Weiss Ratings is among the nation's leading providers of independent ratings on 8,000 U.S. banks and S&Ls and the only provider of independent ratings on the nation's 4,200 insurance companies. It accepts no payments for its ratings from rated institutions.

Note to Editors: State-specific or national lists of health insurers and their medical costs are available upon request.

(1) Survey based on Medical expenses net of reinsurance for insurers submitting the NAIC statutory health statement. Data Source: SNL Financial LC

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