Managed Healthcare Industry Profile

The US managed healthcare industry includes about 1,000 companies with combined annual revenue of about $500 billion. Major companies include Aetna, UnitedHealth Group, and Humana, as well as the Blue Cross and Blue Shield Association and Kaiser Permanente. The industry is highly concentrated: the 50 largest companies generate about 75 percent of revenue.

COMPETITIVE LANDSCAPE

Demand for health insurance products is driven by the rising costs of medical care. The profitability of individual companies depends on efficient operations and the ability to negotiate favorable contracts with healthcare providers. Large companies and organizations have advantages in negotiating contracts with healthcare providers. Small companies can compete successfully by providing special coverage plans as part of government programs such as Medicaid, or for specialized populations. The industry is highly automated and capital-intensive: annual revenue per employee is close to $1 million.

Reforming the US healthcare industry continues to be a top agenda item in Washington, but a consensus on the best way to reduce healthcare spending has yet to be reached. The managed healthcare industry will most certainly be impacted by any changes initiated by federal legislators.

PRODUCTS, OPERATIONS & TECHNOLOGY

The industry provides various types of health insurance plans that have built-in cost containment measures, unlike traditional indemnity plans that pay whatever costs are incurred. Among the major products are HMOs; preferred provider organizations (PPOs); point-of-service (POS) plans; and indemnity benefit plans. Companies usually offer a number of such ...