The Department of the Treasury and the Internal Revenue Service released new guidance that is “designed to expand the use of income annuities in 401(k) plans.”
Los Angeles, CA (PRWEB) August 24, 2012
In the past five years, slow growth has characterized the Health and Medical Insurance industry as a result of reduced employer coverage and greater interest by public programs to offer coverage through private plans. From 2007 to 2012, revenue is expected to increase at an average annual rate of 2.8% to $707.4 billion. According to IBISWorld industry analyst Doug Kelly, “during this period, a consistent increase in healthcare expenditure, or medical-cost inflation, has driven revenue growth but pressured operating profit.” The Obama administration has introduced significant healthcare reform that aims to increase access to healthcare, slow medical-cost inflation and improve healthcare quality in the United States. Many of the legislation's initiatives have already started to shape the industry, but most of the reform is not anticipated to take full effect until 2014. In that year, an insurance exchange will be established that will provide individuals with tools to compare health insurance plans. Additionally, more individuals will qualify for financial subsidies, thereby increasing demand.
The reforms enacted during the Obama administration in 2010 have been driving mergers and acquisitions, as insurers benefit from economies of scale and greater numbers of subscribers even though reimbursement rates are expected to decline. IBISWorld expects the consolidation trend to accelerate over the next two years in the Health and Medical Insurance industry, during which time insurers will be preparing for implementation of the Affordable Care Act. In addition, there are tax incentives for privately held companies to sell now when capital gains taxes are relatively low. There is an incentive for health insurers to be large to realize economies of scale and efficiency. Instead of mega-mergers among the big companies, IBISWorld expect to see the large players acquire the smaller regional providers. “While individual companies will likely gain greater market share in terms of revenue, a more accurate way to gauge market concentration is the level of membership at the top for industry firms,” says Kelly. IBISWorld estimates that UnitedHealth Group, WellPoint, Aetna and Humana manage or insure a much larger proportion of individuals that than the proportion of revenue that they generate.
Despite debate over medical-cost containment, health expenditures are expected to be the main driver of industry revenue growth over the five years to 2017. In 2012, IBISWorld expects revenue to increase 2.9%. In the five years that follow, revenue is forecast to rise consistently. The majority of growth will likely be associated with medical-cost inflation, but the industry is also projected to benefit from the aging US population. In addition, as the baby-boomer generation ages, more people will need medical coverage. Medicare expenditures are expected to increase as the baby-boomer generation retires, and growth will come from services related to this government program. The private-sector insurance market will also benefit from the aging population, with many individuals looking to supplement government coverage with private insurance. For more information, visit IBISWorld’s Health & Medical Insurance in the US industry report page.
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IBISWorld industry Report Key Topics
This industry assumes the risks of and assigns premiums for health and medical insurance policies. Insurance is the transfer of the risk of a loss in exchange for payment. Operators also provide administrative services for self-funded insurance plans, whereby an employer provides health benefits to employees with its own funds. Under this structure, the industry operator is a third-party administrator and is not responsible for health benefit payments.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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