State of the Industry 2006

Welcome to MANAGED HEALTHCARE EXECUTIVE's State of the Industry Report. We hope to make sense of the various "balancing acts" in our industry and to prepare you for another challenging year.

Act 1: Capital Ideas. The State of the Industry Report monitors a market basket of metrics that in this particular year, demonstrate a leveling off of many economic indicators. Spending on healthcare services for privately insured individuals, for example, increased 8.2% in 2004, according to the Center for Studying Health System Change, virtually the same rate of increase measured the year before. However, this rate continues to outpace the growth of the economy overall, which increased a respectable 5.6% during the same period. According to the Center, continued or growing gaps between these measures will make health insurance increasingly more difficult to obtain and maintain for certain segments of the market.

If the health system CEO feels guarded optimism from the stabilization of industry benchmarks, the managed care CEO is likely basking in reports that this segment continues to be strong. Indeed, while half of the rated nonprofit health systems were downgraded versus upgraded, half of the nation's HMOs are considered "financially strong," according to Weiss Ratings Inc., an independent provider of ratings for service and financial sectors. Based on data from the second quarter of 2004, the percentage of insurers receiving a Weiss rating of A (excellent) or B (good) rose to 50%, a significant increase from 1998, when only 20.8% of HMOs qualified. Of the 482 HMOs reviewed by Weiss during 2004, 65 companies were upgraded, while only three were downgraded.