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A.M. Best Special Report: Medical Costs Hit Health Insurers’ Earnings; Government Business Boosts Enrollment

OLDWICK, N.J.--(BUSINESS WIRE)-- The overall earnings of the largest publicly traded health insurance companies declined through the six months ending June 30, 2012, reflecting a rise in medical costs when comparing 2012 with 2011 results under generally accepted accounting principles. Government-sponsored business has driven growth in enrollment at a majority of the carriers, offsetting pressure on earnings to a degree. In addition, the growth of membership in part reflects the industry’s increasing appetite for expansion through strategic acquisition, which compares favorably with building businesses from the ground up.

Two companies reported net losses through June 30, 2012. Molina Healthcare, Inc. posted a net loss of $19.0 million, driven in part by losses in its aged, blind and disabled (ABD) contract business in Texas. The company has increased enrollment in the ABD service contract business in several states; it has risen 40% year over year. Centene Corporation reported a net loss of $11 million, which mainly reflects significant medical costs driven by high utilization in its Medicaid line of business, as well as higher medical costs reported at its subsidiary, Celtic Insurance Company. The higher costs were associated with member conversions from another plan during the first quarter of 2012.

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A.M. Best Company
Wayne Kaminski, 908-439-2200, ext. 5061
Senior Financial Analyst
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations

Source: A.M. Best Co.