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Trend lines look good for WellPoint

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More people have jobs and yet the use of health care remains stagnant—which should drive nice profits when WellPoint Inc. reports first-quarter earnings on Wednesday. The trends even have some wondering if consumer-driven health plans are finally starting to make a real difference in Americans’ health care spending habits.

The U.S. economy added nearly 2 million jobs over the past 12 months, according to the Bureau of Labor Statistics. That growth in employment helped drive 1.6 million new members into the health plans operated by Minnesota-based UnitedHealth Group over the past year, the industry bellwether reported on Thursday.

Yet levels of spending by its health plan members “remain moderate,” reported UnitedHealth CEO Stephen Helmsley. The percentage of health insurance premiums spent on medical bills ticked down to just 81 percent in the first quarter, the company reported. That helped boost UnitedHealth's profits by 3.1 percent, exceeding analysts' estimates.

Analysts expect WellPoint's profits to dip 3 percent in its first-quarter report, to $2.27 per share, according to a survey by Thomson Reuters. But the UnitedHealth report suggests the expected return of health care consumption is not happening—at least not yet.

"There has been some noise around volume returning, but this report does not point toward a return of utilization," BMO Capital Markets analyst Dave Shove wrote in a note to investors.

Instead, UnitedHealth’s results reinforce the trends seen in 2011. According to market research firm IMS Health, Americans reduced their visits to physicians by nearly 5 percent in 2011 and spent 1 percent less on prescription drugs. Adjusting for inflation, per-capita spending on health care grew just 0.5 percent last year—a far cry from the galloping pace of health care spending over the past 40 years.

That data prompted Drew Altman, CEO of the Kaiser Family Foundation, to speculate that we may be witnessing a new normal in U.S. health care spending.

“We have a new phenomenon to watch with important implications for people and costs,” Altman wrote in an April 16 blog post. He added, “It will take a few more years of monitoring utilization patterns to know if we are seeing a recession-effect or a real change in patterns of use, what may be driving them, and how deep this one-time adjustment in patterns of use may go.”

If the lowered health care spending is more than an after-effect of the recession, Altman thinks the main reason is the increase in high-deductible health plans. He cites Kaiser’s data showing that the share of workers in a plan with a deductible of $1,000 or more grew from 18 percent in 2008 to 31 percent in 2011.

In Indiana, high-deductible and consumer-directed health plans have been embraced even more aggressively than across the country.

Altman notes that the Patient Protection and Affordable Care Act actually will accelerate this growth. The law will pay subsidies to help individuals and small businesses to buy health insurance in exchanges where coverage will be standardized into four categories. But the cheapest of those plans will have family deductibles approaching $8,000, according to Kaiser’s estimates.

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  1. John, unfortunately CTRWD wants to put the tank(s) right next to a nature preserve and at the southern entrance to Carmel off of Keystone. Not exactly the kind of message you want to send to residents and visitors (come see our tanks as you enter our city and we build stuff in nature preserves...

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