NEW YORK, Thu, Jun 2 2011 (Reuters) - Americans' use of medical services has not yet rebounded during the weak economy, health insurers say, in a trend that keeps the companies' costs down and could bolster their profits further this year.
Low healthcare utilization was a major reason behind the health insurers posting first-quarter profits well above analyst forecasts earlier this year.
The companies have been factoring increases into their pricing for their plans, but executives at an investor conference this week said utilization continued to stay low.
"Medical costs have not come back to trend levels we anticipated," UnitedHealth Group Inc (UNH.N: Quote, Profile, Research, Stock Buzz) CEO Stephen Hemsley told the conference, held by Sanford Bernstein.
Hemsley, whose company is the largest U.S. health insurer by market value, said UnitedHealth continued to believe that medical cost trends will return "to more normal levels."
"But to date whether it's driven by economic trends or whatever, the medical costs continue to trend to be more moderate," Hemsley said.
Historically, McCallister said, some health insurers have failed to anticipate a rebound in medical costs, and priced plans too low -- hurting results and investor confidence.
"The utilization is still relatively softer than we would have expected, no one knows when and if it is going to come back," McCallister said. "We're basically assuming that it's coming back because we're not going to miss that uptick."
Some analysts have suggested that the lower-than-expected utilization is a more fundamental change rather than a fleeting one. Due to structural changes in healthcare plans over the years, such as higher co-pays and other fees, consumers have steadily borne more of the healthcare costs.
"You can argue whether this economic situation we're in is long term and is going to have long-term effects and whether it has fundamentally changed something," McCallister said. "I don't know. I'm not an economist."
Jay Gellert, CEO of Health Net Inc (HNT.N: Quote, Profile, Research, Stock Buzz), which operates plans in the Western United States, said the extended downturn, and its associated job losses, makes this situation more unusual.
"Typically, when people come back to work they then use health care services," Gellert said. "But in California if you're at 11.5 percent unemployment, I'm not sure that's the time you think about getting off your job and doing elective procedures."
"And we're a long ways at least now it seems, from a single-digit unemployment in California, from sub-7 in the U.S., and so I think we may see a longer period of depressed utilization," Gellert said.
However, Gellert said, "there's always risk on our side that we misjudge utilization."
"Once you miss it, you're in big trouble," he said.
(Reporting by Lewis Krauskopf; Editing by Gary Hill)
© 2010 Thomson Reuters. Click for Restrictions.
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