If you are a health insurance executive, then the release Monday of a report by CMS on 2010 health spending was probably a good way to start your week. The annual report on national health expenditures (NHE) found that the increase in health spending was just 3.9% in 2010, the second-smallest increase in the growth rate since the NHE first was compiled in 1960. The smallest increase, 3.8%, was in 2009.
Although numbers for 2011 have not yet been released, given the tremendous returns most health insurers achieved last year and the number of times executives cited low medical utilization as a key factor in earnings growth, it would be a surprise if health care spending actually increased significantly in 2011.
Even though the report found that growth in total private health insurance premiums slowed in 2010 to 2.4% from 2.6% in 2009, for the first time in seven years, the growth in premiums exceeded the growth in insurer spending on health care benefits, with the net cost of insurance increasing by 8.4% or $11.3 billion. In addition, growth in private health insurance spending for hospital services slowed considerably in 2010.
The question is will 2012 be the year of the rebound when it comes to health care spending? Analysts seem mixed. Scott Fidel, a research analyst in Deutsche Bank, wrote in a Jan. 10 note that he expects health care spending to remain stagnant this year, and end up between 3.5% and 4%. However, Morningstar analyst Matt Coffina told me that spending growth is difficult to predict and is largely influenced by the economy in general.
So, how do you think health care spending will fare this year?