• It's hard to imagine they thought this through

    I’ve said repeatedly that I’m not interested in wading too far into the politics of much of health care reform, but this is stunning.  Sam Stein reports on a Goldman Sachs analysis of what health care reform will mean to the bottom line of private health insurers:

    A study put together by Goldman in mid-October looks at the estimated stock performance of the private insurance industry under four variations of reform legislation. The study focused on the five biggest insurers whose shares are traded on Wall Street: Aetna, UnitedHealth, WellPoint, CIGNA and Humana.

    The Senate Finance Committee bill, which Goldman’s analysts conclude is the version most likely to survive the legislative process, is described as the “base” scenario. Under that legislation (which did not include a public plan) the earnings per share for the top five insurers would grow an estimated five percent from 2010 through 2019. And yet, the “variance with current valuation” — essentially, what the value of the stock is on the market — is projected to drop four percent.

    Things are much worse, Goldman estimates, for legislation that resembles what was considered and (to a certain extent) passed by the House of Representatives. This is, the firm deems, the “bear case” scenario — in which earnings per share for the top five insurers would decline an estimated one percent from 2010 through 2019 and the variance with current valuation is projected to be negative 36 percent.

    What the firm sees as the best path forward for the private insurance industry’s bottom line is, to be blunt, inaction.

    I don’t believe any of their analyses are wrong.  It’s very likely that forcing private insurers to cover people with pre-existing conditions will cost them.  That’s the POINT.  They know that cherry-picking the healthy people is better for the bottom line.

    What I don’t get is why do this analysis at all?  Why commit pen to paper?  Is anyone surprised by this?  Did anyone not know these things to be true?

    By declaring that the best path forward for the bottom line for insurance companies is for reform to fail will not help reform to fail.  It will likely help reform to occur.

    Do you think someone at Goldman Sachs wanted to screw the insurance companies?

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