WSJ reports 7/31/06 regarding potential decline of public HMO stocks following disappointing earning reports last week. Nearly every HMO revised their yearly membership projectings as price competition and their desire to maintain margin makes these goals unprofitable. The real question is whether health plans are adding value to the average customer in what they are doing or have they turned into a utility type enterprise in which everyone needs one but there really is no differentiation other than price?

What the story doesn't report is that regional competitors, such as non-profits and smaller for profit plans, do not have the same margin requirements and may be in a better position to compete on price even with the lack of the so-called economies of scale. In addition, many small TPAs still are cheaper than the large plans and provide better service.

All of this ignores, of course, the fact that health plans have not really been doing much to control costs other than passing more of it on to the customer. Targeted disease and population management and wellness programs are a start but it is hard to see how they are going to get the traction required to have a major impact on a macro level.

http://online.wsj.com/article/SB115431323388421950.html?mod=hps_us_my_companies