8/8/2019 R40834

1/102

8/8/2019 R40834

2/102

8/8/2019 R40834

3/102

8/8/2019 R40834

4/102

8/8/2019 R40834

5/102

8/8/2019 R40834

6/102

8/8/2019 R40834

7/102

8/8/2019 R40834

8/102

8/8/2019 R40834

9/102

8/8/2019 R40834

10/102

8/8/2019 R40834

11/102

8/8/2019 R40834

12/102

8/8/2019 R40834

13/102

8/8/2019 R40834

14/102

8/8/2019 R40834

15/102

8/8/2019 R40834

16/102

8/8/2019 R40834

17/102

8/8/2019 R40834

18/102

8/8/2019 R40834

19/102

8/8/2019 R40834

20/102

8/8/2019 R40834

21/102

8/8/2019 R40834

22/102

8/8/2019 R40834

23/102

8/8/2019 R40834

24/102

8/8/2019 R40834

25/102

8/8/2019 R40834

26/102

8/8/2019 R40834

27/102

8/8/2019 R40834

28/102

8/8/2019 R40834

29/102

8/8/2019 R40834

30/102

8/8/2019 R40834

31/102

8/8/2019 R40834

32/102

8/8/2019 R40834

33/102

8/8/2019 R40834

34/102

8/8/2019 R40834

35/102

8/8/2019 R40834

36/102

8/8/2019 R40834

37/102

8/8/2019 R40834

38/102

8/8/2019 R40834

39/102

8/8/2019 R40834

40/102

8/8/2019 R40834

41/102

8/8/2019 R40834

42/102

8/8/2019 R40834

43/102

8/8/2019 R40834

44/102

8/8/2019 R40834

45/102

8/8/2019 R40834

46/102

8/8/2019 R40834

47/102

8/8/2019 R40834

48/102

8/8/2019 R40834

49/102

8/8/2019 R40834

50/102

8/8/2019 R40834

51/102

8/8/2019 R40834

52/102

8/8/2019 R40834

53/102

8/8/2019 R40834

54/102

8/8/2019 R40834

55/102

8/8/2019 R40834

56/102

8/8/2019 R40834

57/102

8/8/2019 R40834

58/102

8/8/2019 R40834

59/102

8/8/2019 R40834

60/102

8/8/2019 R40834

61/102

8/8/2019 R40834

62/102

8/8/2019 R40834

63/102

8/8/2019 R40834

64/102

8/8/2019 R40834

65/102

8/8/2019 R40834

66/102

8/8/2019 R40834

67/102

8/8/2019 R40834

68/102

8/8/2019 R40834

69/102

8/8/2019 R40834

70/102

8/8/2019 R40834

71/102

8/8/2019 R40834

72/102

8/8/2019 R40834

73/102

8/8/2019 R40834

74/102

8/8/2019 R40834

75/102

8/8/2019 R40834

76/102

8/8/2019 R40834

77/102

8/8/2019 R40834

78/102

8/8/2019 R40834

79/102

8/8/2019 R40834

80/102

8/8/2019 R40834

81/102

8/8/2019 R40834

82/102

8/8/2019 R40834

83/102

8/8/2019 R40834

84/102

8/8/2019 R40834

85/102

8/8/2019 R40834

86/102

8/8/2019 R40834

87/102

8/8/2019 R40834

88/102

8/8/2019 R40834

89/102

8/8/2019 R40834

90/102

8/8/2019 R40834

91/102

8/8/2019 R40834

92/102

8/8/2019 R40834

93/102

43

8/8/2019 R40834

94/102

8/8/2019 R40834

95/102

44

8/8/2019 R40834

96/102

The Market Structure of the Health InsuranceIndustry

Table 6. Profit Margins of Health PlansOperating Profits as aPercentage of Premium E quivalents, 2007

Commercial Insured Commercial ASO Commercial Total

Mean Weighted Median Mean Weighted Median Mean Weighted Median

Blue Cross0.63% 0.10% 1.95%

-0.30% 0.27% -0.11% 0.39% 0.22% 0.59%

Independent/1.87% 1.93% 1.26%

-1.09% -1.24% -0.18% 1.56% 1.16% 1.19%

Provider-Sponsored

Total0.63% 0.37% 1.95%

-0.30% 0.17% -0.11% 0.39% 0.32% 0.59%

Source: Sherlock Company, Sherlock Expense Evaluation Reports data.

Notes: Mean is an unweighted average. Weighted averages are weighted by enrollments. Income taxes,

certain state taxes, investment income and interest expense are excluded from these calculations. Premiumequivalents for administrative service only (ASO) plans are fees plus health benefits. Operating Profitsinclude pharmacy and mental health expenses and exclude miscellaneous business taxes. Premiumequivalents exclude miscellaneous business taxes. Provider-sponsored plans are owned by non-profit healthsystems. Independent plans are regionally based and often are closely associated with a provider network.

Table 7. Profit Margins of Blue Cross/Blue Shield Plans, 2008Computed Using Publicly Reported Data

Mean Weighted Median

Operating Margins 1.02% 2.84% 1.18%

Pretax Margin 1 .65% 2.55% 1 .67%

Margin After Taxes 1 .52% 1.64% 1 .24%

Federal Income Tax Rate 23.45% 35.41%13.71%

Source: Sherlock Company analysis of public data (e.g., SEC, NAIC).

Notes: Includes data for all 39 Blue Cross/Blue Shield plans. See notes for Table 6 .

Table 8 shows profit margins for the six largest national commercial insurers in 2008 (Aetna,CIGNA, Coventry, Health Net, Humana and UnitedHealth), whose plans covered 73 millionmembers. Profit margins in Table 8 were computed in the same way as in Table 7 . These datasuggest that large commercial insurers enjoyed higher profit margins in 2008 than BlueCross/Blue Shield plans. To the extent that the 2007 data reported in Table 6 is similar to 2008profit data, the profit margins reported in Table 7 and Table 8 suggest that investment income isa significant source of insurers profits.

Many insurers are active in many different segments of the health insurance market. Table 9shows profit margins for the individual market, the small group insurance market, and the ASOmarket. These markets, according to these data, were less profitable in 2008 than standardcommercial plans. Health insurers on average had negative profit margins in the small groupand commercial ASO markets, but had positive margins in the individual market. That theweighted mean margin for the individual market is less than the unweighted mean suggests thatsmaller insurers in 2007 tended to have higher profit margins in that market segment.

8/8/2019 R40834

97/102

45

8/8/2019 R40834

98/102

The Market Structure of the HealthInsurance Industry

Table 8. Profit Margins of National Commercial Insurers, 2008Computed Using Publicly Reported Data

Mean Weighted Median

Operating Margins 6.01% 5.96% 5.32%

Pretax Margin 5.40% 5.90% 5 .13%

Margin After Taxes 3.62% 3.81% 3 .35%

Federal Income Tax Rate 35.61% 35.35% 34.75%

Source: Sherlock Company analysis of public data (e.g., SEC, NAIC).

Notes : See text and notes for Table 6.

Table 9. Profit Margins By Line of Health Insurance, 2008

Individual

Mean Weighted Median

2.17% 1.04% 6.41%

Small Group

Mean Weighted Median

-5.96% -8 .47% -6.28%

Commercial ASO

Mean Weighted Median

-0.30% 0.27% -0.11%

Source: Sherlock Company, Sherlock Expense Evaluation Reports and publicly reported data.

Notes: Profit margins for Commercial ASO using data for Blue Cross/Blue Shield Commercial ASOplans (Table 6 ). Profit margins for the small group and individual markets were estimated usingdata from 10 plans serving policyholders in 13 states. See text and notes for Table 6 .

EFFECTS OF REPORATE ON HEALTH INSURANCEINDUSTRY :

The policy statement is in line with the market expectations, i.e., RBI announced no hike inCRR and a 25 bps (bps) increase in Repo rate but a 50 bps hike in Reverse Repo rate was notexpected by many

Highlights of RBI Monetary Policy Review for first quarter of the financial year FY2010-11 The Bank Rate has been retained at 6.0%

Repo rate increased by 25 bps from 5.5% to 5.75% with immediate effect

Reverse repo rate increased by 50 bps from 4.0% to 4.50% with immediate effect

Cash Reserve Ratio (CRR) of scheduled banks has been retained at 6.0% of their netdemand and time liabilities (NDTL)

The projection for WPI inflation for March 2011 has been raised to 6.0% from 5.5%

8/8/2019 R40834

99/102

46

Baseline projection of real GDP growth for FY2010-11 is revised to 8.5%, up from 8.0%with an upside bias

M3 and non-food credit growth projections for FY2010-11 have been retained at 17% and20% respectively

Mid-quarter review of Monetary Policy to be a regular event beginning from 16 September 2010

The Reserve Bank of India (RBI) has been very cautious in its approach to the monetary policyso that the applecart of growth is not affected much. The policy statement is in line with themarket expectations, i.e., RBI announced no hike in CRR and a 25 bps (bps) increase in Repo rate

but a 50 bps hike in Reverse Repo rate was not expected by many.

Although RBI has the head room to increase the policy rates even more, we think that the central bank will take a slow and steady approach to increasing rates in the coming months. Theintroduction of mid-quarter policy review might be a step towards that.

The developed economies have been forced to have an accommodative monetary policy as their economies are still under recovery. Therefore, RBI has taken a slow and steady approach to rate

hikes despite inflation being in the double digits since February.Cause and EffectBy hiking the Reverse Repo rate, RBI has tried to lower the non-food credit off take which iscurrently at 22.3%. The current level of credit off take is higher than RBIs projection of 20% for the year. The hike in Reverse Repo is 25 bps more than the hike in Repo rate.

This step would lead to banks parking more money with the RBI.Interest rate sensitive sectors like Automobiles, Real Estate, Banking and higher risk lendingsectors like Aviation and Capital Goods might face the heat going forward as inflation is expectedto remain high in the short to medium-term considering the recent hike in the fuel prices.

Export dependent sectors like IT may also get affected as the Rupee may witness appreciation inthe short to medium-term due to the rate hikes as well as capital inflows. RBI also anticipates largeinflows into India which can lead to Rupee appreciating considerably.

On 26 July 2010, Moodys rating agency upgraded the local currency government bond ratingfrom Ba2 to Ba1 with a positive outlook, just a notch below the investment grade rating of Baa3.This move is also expected to bring in higher inflows into the country, there by asserting anupward pressure on the Rupee.

Inflation woes

Although RBI expects the economy to grow by 8.5% in this fiscal year, the major domestic causeof worry is inflation. The fuel price deregulation and the subsequent impact on the industry areexpected to add a couple of points to inflation. Thus, inflation is expected to be in double digits for the next couple of months.The RBI has also increased the projection for March 2011 from 5.5% to 6.0%, which goes to showthat inflation worries may persist for the rest of the year.Even though, currently the monsoon deficit is on the lower side, the risk of a lower monsoon canstill exists. A failed monsoon or major deficit in rains in agrarian areas will lead to a doublewhammy effect on inflation

8/8/2019 R40834

100/102

47

Factors Affecting Health Care

Many factors affect health care.

The factors affecting health care are varied and far-reaching. As health care around the world isexamined, access and use are gaining more attention. If you have health problems -- chronic or acute -- having high-quality, accessible health care is important. Access to health insurance,cultural factors, socioeconomic status, setting, and beliefs about health care, are the mostimportant factors considered when it comes to proper health care.

Benefits

1. Many countries in the world have universal health care for their citizens. Access to healthcare can be determined by the availability of national medical coverage or to that from

private health insurance, according to a study published by Alfredo Fort and LaurenVoltero. In this study, Fort and Voltero discovered that those without insurance were lesslikely to go to the doctor if they became ill or were injured, compared with people whohad easy access to health coverage.

Culture

2. Fort and Voltero found that cultural beliefs about medical care can have a substantialimpact on whether or not people seek health care when they become ill or are injured. Insome cultures , lack of access to health providers who are of a similar culture or speak thesame language can be particularly difficult. This is particularly true in the Latino culturesin the United States.

Income

3. Fort and Voltero also discovered that income levels have a significant impact on access tohealth care. The poor often have little affordable health care. Add to this the expense of

pharmaceuticals, and going to the doctor is out of the question for those who do not haveuniversal health care or health insurance.

http://www.ehow.com/health/http://www.ehow.com/health/http://www.ehow.com/health/http://www.ehow.com/health/http://www.ehow.com/health/http://www.ehow.com/cultures/http://www.ehow.com/health/http://www.ehow.com/health/http://www.ehow.com/cultures/

8/8/2019 R40834

101/102

48

Location

4. If you live in a city, you're more likely to be able to access health care than people wholive in rural areas, according to Fort and Voltero. In many cases, doctors choose not to

practice in rural settings because of financial constraints or due to lack of resources inrural areas. Often, these areas have deficits in specialists or hospital facilities. As a result,

patients may need to drive long distances to attend medical appointments.

Beliefs

5. Fort and Voltero also found that spiritual beliefs have an impact on the use of health carefacilities. In many cultural groups, including Native American, Amish, Asian and others,using modern medical care is in direct conflict with traditional beliefs about the source of health problems and illness. People immersed in these beliefs may turn to a moretraditional healer such as a curandero or acupuncturist for relief of their symptoms.

Concluding RemarksEvidence suggests that health insurance markets in many local areas are highly concentrated.Many large firms have reacted to market conditions by self-insuring, which may provide some

competitive pressure on insurers, although this is unlikely to improve market conditions forother consumers. The exercise of market power by firms in concentrated markets generally leadsto higher prices and reduced outputhigh premiums and limited access to health insurancecombined with high profits. Many other characteristics of the health insurance markets,however, also contribute to rising costs and limited access to affordable health insurance.

Some evidence suggests that insurance companies profits are not large, especially during thecurrent economic recession; although some of those estimates exclude investment income. Evenif health insurers were highly profitable, it is unclear how much reducing insurance industryprofits would do to reduce total health care costs or even reduce administrative costs. Nor is itclear that more vigorous enforcement of antitrust laws and regulations would succeed in courtsor would significantly reduce health insurance premiums or expanded health insurance coverage.

Health insurance is intertwined with the whole health care system. Health costs appear to haveincreased over time in large part because of complex interactions among health insurance, healthcare providers, employers, pharmaceutical manufacturers, tax policy, and the medical technologyindustry. Reducing the growth trajectory of health care costs may require policies that affectthese interactions. Policies focused on health insurance sector reform may yield some results, butare unlikely to solve larger cost growth and problems of limited access to health care if otherparts of the health are left unchanged.

8/8/2019 R40834

102/102

49