Investor’s Business Daily Profiles Health Plan Manager for Self-Insured Corporations
Investors' Business Daily today profiles First Health Group Corp., a health plan manager for large, self-insured corporations that is expected to profit in the next couple of years as the rise in HMO premiums leads more employers towards self-insurance. First Health is the only plan in the self-insured market that assumes no risk for its members, allowing employers who opt to "shoulder the medical cost risk" of their employees to reduce the costs of coverage through First Health's "low rates." First Health primarily makes money by "renting access to its preferred provider organization -- a national network of 375,000 doctors and 4,100 hospitals." When HMO prices "peaked" in 1990, the company enjoyed a "strong two-year run," and analyst Ed Kroll of SG Cowen said he expects First Health to similar earnings if prices spike again this year, possibly reaching $645 million in 2002. "When corporate America is complacent, it's harder for First Health to get in the door. But with the pricing environment we're in now, things get shaken up. Especially going into a recession, companies have to do things to save their margins," Kroll said. Analyst John Rex of Bear Stearns & Co. adds that other insurers with self-funded options, such as Cigna and Aetna, are also likely to profit as HMO premiums increase (Grugal, Investor's Business Daily, 4/2).
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