Home > Employee Benefits > Goldman Sachs Equity Research Report on health plan trends

Goldman Sachs Equity Research Report on health plan trends

I was honored to represent WGA on a recent Goldman Sachs Equity Research “industry expert conference call” with over 100 of their institutional investors, to provide our perspective on pricing and trends for employee benefits programs at mid-sized companies. This is the 10th year that I’ve been asked by Goldman Sachs’ Healthcare industry analysts, specifically in the “Managed Care” segment, to offer state of the market commentary from the unique perspective we bring as consultants to mid-sized employers.

Our views are highly valued by investors in managed care equities, as we have demonstrated an ability to provide more “real time” assessments of market conditions that can impact quarter-to-quarter financial performance at publicly traded health plan carriers. The majority of “industry experts” interviewed by equity research entities tend to be those focused on Fortune 1000 clientele, who are predominantly self-funding their health plans (thus carriers are not taking related insurance risk, but instead generating small margin revenues on administrative services – a far less volatile measure of carrier financial performance over short term earnings cycles). Further, such firms are making health plan modification decisions as much as 12 to 18 months in advance, while our targeted mid-sized employers who are mainly buying insured health plan products  (carrier risk-bearing) typically decide on next policy year plan approaches 30 to 60 days prior. Emerging trends can therefore be identified far sooner in our world, and my old friend Matt Borsch at Goldman Sachs was smart enough to realize this and bring our views to the attention of his investors.

Goldman Sachs’ summary report characterized their most prominent takeaway of this year’s call as “price competition amongst health plan carriers has markedly increased from recent years. The manifestation of price competition is a much greater willingness by carriers to negotiate to lower rate increases to retain business and significant price movement by carriers on new business opportunities.” Another key takeaway they identified was our observation that middle-market employers are doing less cost-shifting to workers now that price increases are coming in better than expected (at least from a purchaser standpoint), and such trends may translate to less restraint on health care services utilization demand over time (though this is not expected to have a materially negative impact for 2012).

Other issues and trends discussed in the call included health care reform, self-funding, population health management initiatives, and tiered-network product development. Give the report a read by clicking here. I can’t promise it will take your breath away, but I do believe you’ll emerge with a better sense of where things stand in the health plan market for mid-sized employers.



About the Author

Ken Ambos is a Senior Vice President in WGA’s New York office. He is responsible for developing and managing Employee Benefits client relationships, and specializes in advising mid-sized employers about the direction of their employee benefit programs. In addition, he provides M&A due diligence/consulting services for Private Equity firms to help them assess and manage employee benefits transactional risk.

212.784.5622   kambos@wgains.com   Connect with Ken on LinkedIn

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