7 Things You Need to Know About Managed Care in 2010

1. Strategy: Cigna, Humana and United are just three health plans that have announced a new strategic emphasis for a post-reform world.  But will these new strategies move the needle in any considerable way?  Hint: No.

2. Individual: Reform will boost membership but strain margins – with Blue Cross Blue Shield plans most at risk.

3. Medicaid: Plans will struggle with a growing but changing membership mix that includes childless adults suffering from a variety of untreated conditions and lacking complete medical histories.  Bottom line: More members, strained margins, market exits.

4. Medicare: The real impact of reform on various Medicaid Advantage offerings will be as follows: really bad for PFFS and special needs plans, and a toss-up for HMOs.  Meanwhile things will be at least O.K. — perhaps even very good — for Medicare PPOs and group.

5. Prospects: Despite the rhetoric that managed care will enjoy some kind of big windfall from reform, we just don’t see it playing out that way long-term — which is one reason why shares in these companies are trading at all-time low multiples.

6. The Big Picture: It will be difficult to remember that managed care is a struggling industry when the underwriting cycle turns up, boosting industry profits.  That’s especially true as the up-cycle will likely gain momentum coincident with rollout of the initial elements of reform — masking longer-term challenges such as the erosion of the industry’s lucrative fully funded business lines.

7. Consumer-Directed Healthcare: An important year as CDHPs test whether they will ever be more than a niche product for the relatively healthy and wealthy.  We continue to see niche status for this line, but you never know.