Has the tipping point regarding profitability versus viability finally come? Fed up with escalating premiums, employer groups appear to be aggressively shopping around, and in many cases dropping coverage for their employees altogether.

Today the New York Times reported that shares of WellPoint plummeted more than 16 percent in after-hours trading Monday after the company lowered its profit forecast, citing higher medical costs and lower-than-expected insurance enrollments. Humana and Aetna shares dropped 10% and United dropped 9% following this outcome. 

With the shift by employer groups to self-funded plans (meaning insurers simply pass along the costs of employee health costs with an administrative fee to the employer) and with more individuals becoming responsible for finding and funding insurance coverage for themselves, enrollment is not what it used to be in the large insurer market.

According to Sheryl Skolnick, a health care analyst with CRT Capital in Stamford, Conn., and quoted in the NYT article, with regard to insurance premiums, “prices are higher than people feel they are able to afford,” especially for individuals who buy their own insurance because they do not have coverage from an employer.

So, have insurers premiums finally reached the tipping point where their prices are too high to be sustainable? I believe so. And until these companies start offering products such as catastrophic insurance (without requiring a separate managed care plan) and lower priced, appropriately managed, affordable plans I don’t think this will turn around any day soon.

The good news? Perhaps this will reduce the trend of physician reimbursement gouging that has been sustaining profits and begin to put the emphasis on insurers’ operational efficiency to drive excess dollars in the future. And no, that doesn’t mean insurers should further cut their customer service staff and cut back on the resources necessary to manage all of the myriad and convuluted processes that these companies have built up over time. Rather, a focus on lean and efficient simplified processing, less complexity in medical and administrative policy making, and more accountability that leads to partnering with the other stakeholders in health care might be the way forward for these behemoths.  Or, they can simply lumber along and wait for the market to finally, finally!, correct for the abuses of the past.

Private health insurers have jumped on the band wagon when it comes to not paying for preventable injury or illness occuring through hospital errors. Medicare instituted non-payment of errors last October.

Aetna, Wellpoint, and some other large insurers are starting with a shorter list than Medicare’s so-called ‘never-event’ list. Primarily focused on the most egregious errors such as bed sores, falls and hospital infections, the list could expand quickly as these initiatives are implemented.

The idea is that insurers will no longer pay for mistakes, and hospitals cannot bill patients directly for the cost of care associated with fixing these problems, in an attempt to improve patient safety. But is that going to be the outcome? What about the patient who, say, has a sponge left inside after an operation? Will a procedure be performed gratis to remove it, or will it simply be left there instead?

If insurers are truly seeking to improve safety and lower the overall costs of care, it strikes me that responding punitively is not the right answer. Rather, why not help support safety by paying for screenings that help identify MRSA in patients coming in to the hospital, and reward those hospitals that have significantly fewer errors over time.

Indeed, every effort should be made to prevent errors in the first place, so shouldn’t the focus be on paying for preventive measures rather than on not paying for fixes when they occur?

Otherwise, this will just become another reason for insurers to not pay for needed care which will cycle through the system adding more expense elswhere. Meanwhile patient welfare may be compromised when things go wrong, which can only exacerbate the problem going forward.