Private Cos to Help Reform Healthcare

Highlights include WellPoint, Inc. (WLP - Analyst Report), Humana Inc. (HUM - Analyst Report), Coventry Health Care, Inc. (CVH - Analyst Report), Health Net Inc. (HNT - Analyst Report), Molina Healthcare, Inc. (MOH - Analyst Report), Amerigroup Corporation (AGP - Analyst Report) and Aetna Inc (AET - Analyst Report).

The private sector is now partners in healthcare reform.

Key healthcare stakeholders met yesterday with President Obama to pledge their support in slowing the rising cost of healthcare over the next decade.  In a letter addressed to the President and signed by the American Medical Association, the Service Employees International Union, and the main trade groups from the drug, hospital, medical-device and health-insurance industries, healthcare industry representatives vowed to stem the rate of increase in future health and insurance costs by 1.5% per year for the next 10 years, or approximately $2 trillion.

Although lacking detail, the letter did propose a co-ordinated industry effort in developing strategies toward the following: administrative simplification and increased transparency of the healthcare system; the alignment of quality and efficiency incentives across healthcare providers; and the increased use of health information technology to improve delivery of services.

In sharp contrast, healthcare reform in Washington has to-date been more focused on the reduction of government spending. Various proposal have been floated, including: potential bundling of payments for hospitals; the reduction of hospital re-admissions; lowering of Medicare Advantage payments; changes to the tax treatment of health insurance benefits; and even the creation of a public plan option. The so-called "public plan" option would allow people to enroll in a publicly-sponsored health plan, potentially competing side-by-side with private insurance plans.

The Senate Finance Committee is scheduled to hold a roundtable discussion on the financing of health care legislation later this week, while discussion on the specific details of any change is expected to continue in Congress for several months yet.

We believe yesterday's action by the private sector signals a new spirit of co-operation in the healthcare reform process and an opportunity to influence the future healthcare landscape. In the case of health insurers, in particular, engagement with government efforts to stem costs strengthens the case against a proposed "public plan" option. Our health insurer sector universe includes WellPoint (WLP - Analyst Report), Humana (HUM - Analyst Report), Coventry Healthcare (CVH - Analyst Report), Health Net Inc. (HNT - Analyst Report), Molina Healthcare (MOH - Analyst Report), Amerigroup Corporation (AGP - Analyst Report) and Aetna Inc (AET - Analyst Report).