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TMFHelical (98.83)

The Health Insurance Business

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March 11, 2014 – Comments (2)

The Helical Portfolio owns two health insurers, Wellpoint and Heath Net.  Health insurance, like other forms of insurance, is likely to be with us for quite some time.  But in what form?  Currently, size matters, as contracts with large and multi-locationed employers are key.  Yet, change is here.  Exchanges are now letting consumers select, a process that isn't easy.  And we may well move increasingly from a dominent 'employer provided' to 'empolyer reimbused' model.  Who wins there?  Local 'narrow network' providers have done well on exchanges (MA model), as they can pass on cost savings with limited networks.

I've heard in a couple of places that the 'large insurers' will struggle in the coming years (like perhaps Wellpoint).  One venture forum (Xconomy) noted 'large insurers are dead, but just don't know it yet'.  And there are articles like this that imply the ACO model, once it gets better established, may well take on the insurace aspect as well.

http://www.fiercehealthpayer.com/story/acos-will-replace-insurers-former-white-house-advisor-says/2014-02-26

I think this may be likely, but not soon, and likely not so simple.

For now, I'm content to own insurers, with a focus on ones that have noted exchanges and individual consumer facing business practices are a large part of their strategy.  But .. times they are a changing, so I'll need to keep a close eye on them, which is a shame as close attention tends to lead to over reaction among investors.

Ralph

Helical Investor 

2 Comments – Post Your Own

#1) On March 12, 2014 at 10:46 AM, lemoneater (82.84) wrote:

I'd be interested to read your take on 24 hour urgent care clinics. They appear to be springing up like mushrooms after rain.

Some underinsured people are looking for cheaper alternatives that they can pay out of pocket so that they can tap their insurance with its high deductible only as a last resort for really serious health conditions. 

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#2) On March 14, 2014 at 12:31 PM, TMFHelical (98.83) wrote:

lemoneater,

UCCs (urgent care centers) have been on the rise.  So have nurse staffed clinics.  From what I've read, UCCs are often owned by a small physician group.  They have an advantage of not bearing the full overhead of a hospital based ER, and often not being required (legally, but perhaps ethicly) to see 'all comers).

I used one when my son required stitches on a scout hike.  Made good sense to go there instead of a hosptial.

I think Nurse staffed clinics are more relevant to showing cost savings and I like how they can drive 'follow-on' sales, such as via a drug store (OTC items).  Both UCCs and nurse staffed facilities should appeal to the increase in consumers conscious of their health care cost,  such as when they have high deductable plans.  Continuity of care is a concern, but increasingly less so as electronic medical records expand in utility.  I think it is a trend with legs.  As for investment implications, it could  hamper publicly traded hospitals who will see their 'customer acquisition costs' rise.  They rely on emergency rooms to help with overhead costs and move patients to hospital beds.  But UCCs will likely have relationships with hospitals for services that require the higher level of care and facilities.

 

Ralph

Helical Investor 

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