Health Affairs, 23, no. 6 (2004): 11-24 doi: 10.1377/hlthaff.23.6.11 © 2004 by Project HOPE	New Online   McAllen, TX & Beyond: An Expert Roundtable   Geography & Reform   Medicaid or Insurance Exchange?   Siren Song of New GME   Public Plan Option: Pro & Con

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Consolidation

Consolidation And The Transformation Of Competition In Health Insurance

PROLOGUE: Competition drives innovation and efficiency in the larger economy, and for decades the United States has sought to use competition to motivate improvements in the health care system’s performance. But competition requires competitors. The emergence of managed care in the 1980s was accompanied by the creation of hundreds of health insurance plans—mostly health maintenance organizations (HMOs)—which forced the incumbent indemnity insurers to reduce their costs or lose their customers. The subsequent senescence of managed care has been accompanied by an equally remarkable shrinkage in the number of competing health plans, as small firms sold out to their larger rivals and as even some of the industry’s biggest names disappeared in a wave of mergers and acquisitions. In the past year, for example, UnitedHealthcare has acquired Oxford Health Plans, and Anthem has announced the acquisition of WellPoint, creating megaplans with twenty-two million and twenty-eight million enrollees, respectively.

In this paper James Robinson presents new data on the consolidation of the insurance industry in fifty states and jurisdictions, highlighting the dominance of a few firms in each market. Robinson documents the dramatic increases in premiums and profits enjoyed by the leading firms during the past four years but notes the change in pricing dynamics that may dampen Wall Street’s enthusiasm. Competition without competitors will not deliver the desired incentives for health care improvement, and Robinson argues that the industry must undergo rejuvenation through new firms and products or face increased regulatory oversight from a disenchanted public sector.

Robinson (jamie{at}berkeley.edu), a frequent contributor to Health Affairs, is a professor of health economics in the University of California, Berkeley, School of Public Health.

Robinson’s paper is accompanied by Perspectives by David Hyman and William Kovacic (representing the U.S. Federal Trade Commission); William Kopit (Epstein, Becker, and Green); and Arnold Milstein (Pacific Business Group on Health).

Abstract

 
This paper presents data on fifty state and substate insurance markets, in terms of the 2003 relative shares of the largest health plans and the antitrust index of concentration. It presents 2000–03 data on rates of growth in premiums, costs, operating earnings, returns on equity, and share prices for the nation’s largest health plans (Well-Point, Anthem, United, Aetna, and CIGNA). Private insurers face renewed price and profit pressures in the short term, but long-term prospects depend on the emergence of new products and new competitors in an increasingly consolidated industry.

This paper analyzes the consolidation of the commercial insurance industry, taking into consideration rivalry among incumbent firms, barriers to entry by firms from other sectors, paucity of substitute products, ability to pass through cost increases from suppliers, and ineffective pushback from purchasers. Data are presented on the concentration of market shares across both health maintenance organizations (HMOs) and preferred provider organizations (PPOs) and across both insured and self-insured employer funding arrangements. The economic success of the industry is highlighted through data on premiums, costs, earnings, and share prices for the sector’s leading firms. The industry faces one of two futures: rejuvenation by the private sector or domestication by the public sector.

Quantifying Consolidation

Top Quantifying Consolidation Prices And Profits Pressures On Profitability Short-Term Prospects Alternative Futures Editor's Notes NOTES

 
Available data on health insurance market shares are distorted because of the differences among products and customer segments in the manner by which insurance is regulated and enrollment is counted. Most HMOs are insured at the state level, and data on firms and enrollment are available from consultants, vendors, and researchers willing to collect the data from state insurance departments. But the majority of Americans covered by commercial health insurance are not enrolled in insured HMOs but in PPOs and in self-insured products not covered or counted by state regulatory agencies.¹ The focus on HMO market shares, to the exclusion of insured PPO and self-insured products, sometimes reflects a mistaken view that HMO and PPO product designs, and insured and self-insured funding arrangements, do not compete with one another.

Data sources. To assess the extent of concentration in the commercial health insurance industry, it is necessary to amalgamate data from multiple sources. Firm-specific data are available for the Blue Cross and Blue Shield plans, both nonprofit and for-profit, and for the investor-owned commercial plans, and state-specific enrollment data are available for insured products (which includes most nonprofit HMOs). Commercial health plan enrollment (employment-based and individually purchased) must be separated from noncommercial lines of insurance offered by the same carriers, including Medicare, Medicaid, and the military TRICARE managed care programs. Commercial coverage does include public employee health benefits, both insured and self-insured, such as the Federal Employees Health Benefits Program (FEHBP) and state public employee programs. The following discussion relies on data compiled by Goldman Sachs Global Equity Research, based on state regulatory filings; investor reports from publicly traded firms; information from nonprofit BCBS plans; the InterStudy HMO Directory (based on state regulatory filings); the InterStudy PPO Performance Report (based on surveys by InterStudy); and direct contacts with individual firms. The figures for the investor-owned plans were last updated as of December 2003; some nonprofit plan data are from 2002.²

Data are available at the state level only, even though some states include multiple geographic markets and some geographic markets overlap state lines. Several states have multiple Blue Cross plans that operate in nonoverlapping parts of the state and do not compete directly with one another (except in border regions). Pennsylvania has four region-specific Blues plans; New York has three. Data are available separately for upstate and downstate New York, because of the radically different markets in New York City and the western part of the state (two Blues plans operate in upstate New York). The data for the District of Columbia include northern Virginia (suburban Washington, D.C.).³ No data are available for Hawaii and Alaska; North Dakota data are not available for health plans other than BCBS. The ensuing discussion refers to fifty "states" but in fact includes forty-seven states, two parts of one state (New York), and one jurisdiction (District of Columbia, including northern Virginia).⁴

Commercial insurance enrollment. Exhibit 1 presents total commercial insurance enrollment (including insured and self-insured funding arrangements) for each state market, plus the percentage held by the largest firm in the market, the percentage held by the three largest firms, the Herfindahl-Hirschman Index (HHI) of market consolidation used by the Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ), and the extent of antitrust concern derived from FTC/ DOJ guidelines (based on the HHI).⁵

Dominant firms. The top three firms typically dominate each market, as indicated in the third column of Exhibit 1. In only three state markets do the largest three plans control less than 50 percent of the total enrollment, and in only fourteen do the largest three plans control less than 65 percent. The fourth column of Exhibit 1 presents the HHI, which is calculated by squaring the market share of each firm in the market and summing across all competitors; the HHI is commonly used to analyze markets and sometimes to block mergers and acquisitions. As evident in Exhibit 1, the HHI for commercial health insurance at the state level is very high, with only three of the state indexes falling below 1,000 (the FTC/DOJ threshold for low level of antitrust concern), twelve falling between 1,000 and 1,800 (moderate level of antitrust concern), and thirty-four exceeding 1,800 (high level of antitrust concern).

Exhibit 2 provides an alternative perspective on the consolidation of the commercial health insurance industry by highlighting the relative shares of each state market held by the four largest U.S. firms (WellPoint, United, Aetna, and CIGNA) and by the BCBS plans that are not part of WellPoint. The Blues, including Well-Point, hold the largest market share in every state except Nevada (where they tied with Sierra Health Services for first) and California, where Blue Cross of California (WellPoint) is tied for first (with Kaiser Permanente) and Blue Shield of California comes in third. While the state-specific BCBS plans formally are owned by forty independent companies, some covering multiple states and others just one, they cooperate with one another in the market for multistate corporate accounts and in building the Blue brand nationally. If all Blues plans were considered part of one firm, they would control 44 percent of the national market. In comparison, if all nonprofit Blues were considered one firm (thereby excluding for-profit Well-Point and WellChoice), the nonprofit plan would control 31 percent of the national market.⁶

The figures presented in Exhibits 1 and 2 should be interpreted with caution, because of the partially distinct customer segments that make up the commercial insurance industry. Large, multistate employers typically purchase self-insured benefits administration from one or more of the national carriers listed in Exhibit 2 or from a state-specific Blues plan linked to the national BlueCard network. The number and relative size of local health plans may be largely irrelevant.⁷ The market for multistate employers in 2003 was served by Aetna (14 percent), CIGNA (9 percent), United (15 percent), WellPoint (12 percent), Anthem (5 percent), other Blue Cross plans (12 percent), First Health (8 percent), and other (25 percent).⁸

Prices And Profits

Top Quantifying Consolidation Prices And Profits Pressures On Profitability Short-Term Prospects Alternative Futures Editor's Notes NOTES

 
Exhibit 3 presents indicators of the financial performance of the largest U.S. health insurers during 2000–2003. This includes year-over-year rates of growth in medical costs, premium rates, operating profit margins, and share prices, plus the average yearly ratio of medical costs to premium revenues for insured products (medical cost ratio). Data are presented for WellPoint and Anthem separately, as their merger was announced only in 2004, as well as for United, Aetna, and CIGNA.

Exhibit 3 next presents the operating earnings margin (earnings before interest and taxes) over the four-year period.¹¹ Given its position as an intermediary between purchasers and providers, the insurance industry traditionally reports thin profits as a percentage of revenues. It was remarkable that during this period of high medical cost inflation, large health plans were able to increase their operating margins. With the exception of Anthem, large plans grew their margins by at least 50 percent (WellPoint and United) and in two cases by more than 100 percent (Aetna and CIGNA, starting from lower baselines).

The numbers of particular interest to investors are the returns on equity, the percentage rate of return for each dollar invested in health insurance firms. As indicated in the next section of Exhibit 3, returns on equity were excellent over the recent four-year period for the leading firms in the sector with the exception of Aetna, which crashed and almost burned as a result of excessive acquisition-driven growth.¹² Returns on invested capital were approximately 20 percent each year for WellPoint, CIGNA, and United, with United spiking to almost 40 percent in 2003, and were comfortably in the teens for Anthem. Even Aetna recovered after its debacle, with return on equity rising into the double digits in 2003 after negative returns two years earlier. Returns for mid-size health plans (not shown in Exhibit 3) were equally attractive, with the 2003 sector high for Oxford (58.7 percent) and an average of 19.9 percent for all publicly traded health plans.¹³ While return-on-equity measures are not available for nonprofit health plans, the nonprofit BCBS plans enjoyed financial results equal to or better than those of their for-profit counterparts. Between 2002 and 2003 the non-profit Blues increased operating earnings by 111 percent and net income by 87 percent, compared with the increase of 42 percent in operating earnings and 36 percent in net income on the part of their for-profit Blues counterparts.¹⁴

The final rows of Exhibit 3 highlight the investor perspective on the health insurance industry.¹⁵ Aetna and CIGNA endured setbacks and loss of market share (mostly to Blue Cross plans) and a consequent volatility in share prices during these four years. WellPoint, Anthem, and United, however, consistently received double-digit rates of appreciation in share prices. By way of comparison, the Standard and Poor’s (S&P) 500 index of equity prices for the broader stock market declined by 10.1 percent in 2000, 13.0 percent in 2001, and 23.4 percent in 2002, followed by a rise of 26.4 percent in 2003.

Pressures On Profitability

Top Quantifying Consolidation Prices And Profits Pressures On Profitability Short-Term Prospects Alternative Futures Editor's Notes NOTES

 
The correlation between the structure of an industry, measured in terms of the share distribution of competing firms, and its long-term profitability, is patchy at best, because of the important role of other determinants of revenues and costs. It would not be appropriate, for example, to infer that the high levels of consolidation documented in Exhibit 2 caused the high levels of profitability documented in Exhibit 3 without considering the role of other determinants. The consolidation among firms already in the industry is only one of five factors typically highlighted in discussions of corporate strategy. The others include barriers that prevent entry by competing firms from other markets, substitute products from other industries, bargaining power among suppliers, and bargaining power among purchasers. Generally, the profit potential is lower in industries with low barriers to entry by firms from adjacent markets, easy replacement by substitute products, and pressure from consolidated suppliers and consolidated purchasers.¹⁶

Barriers to entry. For two decades the most important source of competitive pressure in health insurance has been the availability of new entrants, including start-up HMOs and carriers from adjacent geographic regions willing to fight for enrollment through lower prices. Today, start-ups are rare because there have been no major innovations in technology, product design, or organizational structure that new firms could use to offset the scale advantages enjoyed by incumbents. Even large and successful firms are cautious as to the ease of extending into new markets. Today a national plan will make a serious entry into a new regional market only through the purchase of a large local firm. If the national plan already has a presence in the local market where it makes the acquisition (as it almost invariably the case), market expansion increases rather than decreases consolidation at the local level.

Substitute products. The most radical form of competition comes from substitute products rather than from new purveyors of existing products, as when the personal computer replaced the typewriter. Health insurance had seen no meaningfully different substitute products since the HMO was introduced thirty years ago. However, the recent experimentation with "consumer-directed" health plans combining a tax-sheltered health savings account with a high-deductible PPO, represents a potential substitute, replacing much of third-party (insurer) payment by consumer out-of-pocket payment.¹⁷ The advent of these plans stimulated the formation of several new firms (for example, Definity and Lumenos) and the entry by firms from adjacent product niches (for example, Great West, Fortis, and Mutual of Omaha). For the moment, however, the consumer-directed plan seems more an incremental change to the PPO than an actual substitute and can be offered by large incumbent firms such as Aetna and Humana.

Supplier consolidation. The consolidation of the health insurance industry has been accompanied in many markets by the consolidation of the hospital sector, which has permitted hospital systems to raise the rates charged to insurers.¹⁸ Rising costs for clinical products and services are not incompatible with insurance industry profitability, however, if plans retain the discipline to raise their premiums at a rate commensurate with expected increases in underlying medical costs. Over the past several years, as hospital and other provider costs have surged, the major health plans (including those in Exhibit 3) have not only maintained but reduced their medical cost ratios, from an average of 85.1 percent in 2000 to 82.1 percent in 2003.¹⁹

Purchaser pressure. Despite the prominent role of the corporate purchaser of health benefits in the theory of managed care and managed competition, purchasers have proved ineffective in restraining premiums and profits in markets where consolidation has reduced the number of competing health plans. In the short term, health plans are moderating the rate at which they are increasing premiums relative to costs, but this is primarily attributable to an interest in growing (profitable) enrollment rather than to any consolidated purchasing power among employers. The longer-term risk to insurance industry profitability could be an abandonment by employers of health insurance as a fringe benefit and any resulting growth in publicly provided insurance (especially Medicaid expansions).

Short-Term Prospects

Top Quantifying Consolidation Prices And Profits Pressures On Profitability Short-Term Prospects Alternative Futures Editor's Notes NOTES

 
Consolidation of local markets, substantial barriers to new entry, few substitute products, ability to pass on increased provider costs, and a paucity of purchaser pressure are transforming competition in the health insurance industry. Further consolidation, and a further increase in entry barriers, is to be expected, as small local plans continue to sell out to the dominant carriers. The regional investor-owned health plans could be acquisition targets, offering national carriers increased enrollment and further reducing the potential for price competition. UnitedHealthcare’s acquisitions of MAMSI and Oxford eliminate the most dynamic local plans in the mid-Atlantic and New York markets, respectively, perhaps foreshadowing acquisition efforts targeted at mid-size plans elsewhere. Investment bankers have developed scenarios and price estimates for the acquisition of the remaining regional plans, including HealthNet, PacifiCare, Coventry, Well-Choice, Humana, and Sierra.²⁰

Unrealistic enrollment growth targets among the for-profit firms and regulatory pressures on the nonprofit plans are driving premium moderation in the short term. The investor-owned firms announced aggregate commercial enrollment targets for 2004 of 1.8 million, exceeding realistic possibilities. The commercial health insurance industry shrank by one million covered individuals in 2002 and regained only 300,000 in 2003, as the economy edged out of recession. There are fewer and fewer local health plans from which the major carriers can seize enrollment. Some observers believe that the investor-owned firms will feel forced to sustain enrollment growth even at the cost of lower premiums and profit growth, while others foresee continued pricing discipline and strong profit margins.²¹

The other potential source of premium moderation lies with the nonprofit BCBS plans, which have accumulated capital reserves far in excess of statutory requirements. In 2003 the nonprofit Blues expanded their excess capital reserves by more than 50 percent.²² To the extent that regulators are successful in jawboning Blue Cross to lower premiums, however, the consolidation of enrollment and market share will only accelerate. The cycle of consolidation, "excess reserves," jawboning, premium moderation, and increased Blue Cross market share has already been witnessed in states as diverse as Tennessee, Pennsylvania, and Rhode Island.²³

Alternative Futures

Top Quantifying Consolidation Prices And Profits Pressures On Profitability Short-Term Prospects Alternative Futures Editor's Notes NOTES

 
Outside health care, consolidation often signals a period of prosperity and decline, as the industry is spared both the rigors and the stimulus of competition.²⁴ A sustained period of high prices and profits in health insurance would result in continuing shrinkage in the number of firms purchasing coverage for employees, which eventually would engender a political backlash. Conversely, the entry of new products and new competing firms could deconsolidate and revitalize the industry. Two alternative futures for commercial health insurance can be envisaged, each representing a different mix of political initiatives and market responses.

Private-sector rejuvenation. If the U.S. experiment with market-oriented health insurance is to be sustained, the industry must be subjected to renewed rivalry from new product designs and competing firms. One product design that can claim to be innovative and hence disruptive of the industry status quo is the consumer-driven health plan. If the numerous network, tax, regulatory, and customer-acceptance problems facing this product can be resolved, it has the potential to attract new competitors into an otherwise consolidated industry.²⁵ The creation of start-ups such as Definity and the reentry of erstwhile indemnity carriers such as Great West might presage entry by banks and mutual funds with expertise in financial products and the ability to rent provider networks and disease management programs.

An alternative and equally radical product innovation, compared with the dominant insurance designs of today, would renew close contractual ties between particular insurers and physician organizations, as was attempted during the era of managed competition.²⁶ Coordination between the financing and delivery of care has the potential to improve quality and efficiency, but it requires creative solutions to the problems of medical group structure, capitation payment, and regulatory barriers that have plagued prepaid group practices in past years.²⁷

Public-sector domestication. Despite its pricing power and recent profitability, the private health insurance industry may be at the threshold of creeping control or replacement by a publicly financed and administered system. Continued growth in premiums and the number of uninsured citizens could impel an expansion of public programs such as Medicaid and the State Children’s Health Insurance Program (SCHIP). The broadening of criteria for public programs could accelerate the "crowding out" of private insurance, as employers trim their benefits with the understanding that employees can obtain publicly subsidized coverage.

A continuing shift from employers to government as the primary sponsor of coverage need not imply the demise of the private health insurance industry, however, as evident in the role of the commercial industry in servicing TRICARE, the FEHBP, and Medicaid managed care programs. In this scenario, governmental entities will specify some product components while outsourcing to the health plans organizational specifics such as provider reimbursement, disease management, supplemental benefits, and electronic connectivity. The once-competitive insurance industry would evolve into a framework of franchise contracting between consolidated public purchasers and consolidated private insurers.

One of the great theorems of economics, and of life generally, is that unsustainable trends will not be sustained. Double-digit growth in premiums, earnings, and equity share prices are examples of unsustainable trends. In the long term, health insurance will be either revitalized by the private sector, through product innovation and competitive entry, or disciplined by the public sector, through purchasing power and regulatory requirements.

Editor's Notes

Top Quantifying Consolidation Prices And Profits Pressures On Profitability Short-Term Prospects Alternative Futures Editor's Notes NOTES

 
This paper was supported by the Robert Wood Johnson Foundation, through its Changes in Health Care Financing and Organization (HCFO) initiative.

NOTES

Top Quantifying Consolidation Prices And Profits Pressures On Profitability Short-Term Prospects Alternative Futures Editor's Notes NOTES

 

1. J.R. Gabel, G.A. Jensen, and S. Hawkins, "Self-Insurance in Times of Growing and Retreating Managed Care," Health Affairs 22, no. 2 (2003): 202–210; [Abstract/Free Full Text]Henry J. Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits: 2003 Annual Survey, September 2003, www.kff.org/insurance/ehbs2003-abstract.cfm(10 August 2004); and R.E. Hurley, B.C. Strunk, and J.S. White, "The Puzzling Popularity of the PPO," Health Affairs 23, no. 2 (2004): 56–68.[Abstract/Free Full Text]
2. The data in Exhibits 1 and 2 were obtained directly from Goldman Sachs. Discussion of the trends can be obtained through related Goldman Sachs publications.See, for example, M. Borsch, S. Ko, and K.P. Huynh, "U.S. Healthcare Services, Managed Care: 1Q2004 Preview" (New York: Goldman Sachs Global Investment Research, 7 April 2004).
3. The market share data for Virginia do not include the suburban areas of metropolitan Washington, D.C., which are combined with the data for the District of Columbia. Enrollment data for the Maryland suburbs of Washington are included in the Maryland state numbers, not with those for the District of Columbia.
4. The use of state-level data probably understates the true degree of consolidation in the insurance market for individuals, small firms, and mid-size accounts and perhaps overstates consolidation in the market for multistate corporate accounts. To the extent that particular plans focus their efforts and concentrate their enrollment in particular cities within a state, leaving the other parts of the state to other firms, firms and individuals shopping for coverage in any one local will enjoy fewer choices than would appear to be the case from these data. On the other hand, the insurance market for large, multistate employers is not bounded by the plans incumbent in any one state but is served by the three national commercial carriers (Aetna, CIGNA, and United), each with 18–19 percent; by the network of BCBS plans through the BlueCard program, with 20 percent; and by a variety of regional health plans for the remainder.
5. U.S. Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines (Washington: DOJ/FTC, 2 April 1992).
6. M. Borsch, S. Ko, and K.P. Huynh, "U.S. Healthcare Services, Managed Care: The Blues and the Underwriting Cycle" (New York: Goldman Sachs Global Equity Research, 5 January 2004).
7. D. Dranove, A. Gross, and M.J. Mazzeo, "Differentiation and Competition in HMO Markets," Journal of Industrial Economics 51, no. 4 (2003): 433–454.[CrossRef]
8. C. Boorady, S. Soorya, and S. Mong, "Mergers Will Benefit Buyers and Sellers: A Detailed Guide to Mergers and Acquisitions" (New York: Citigroup Smith Barney Equity Research, 16 June 2004).
9. K. Levit et al., "Health Spending Rebound Continues in 2002," Health Affairs 23, no. 1 (2004): 147–159; and [Abstract/Free Full Text]J. Raskin, "Health Care, Managed Care Industry Update" (New York: Lehman Brothers Equity Analysis, 2 April 2004).
10. No equivalent data are available for self-insured funding arrangements, where health plans are paid an administrative fee in lieu of premium and are not responsible for paying claims.
11. J. Raskin, "Health Care, Managed Care Industry Update: Lehman Managed Care 4Q03 Earnings Review" (New York: Lehman Brothers Equity Analysis, 12 March 2004).
12. J. Robinson, "From Managed Care to Consumer Health Insurance: The Fall and Rise of Aetna," Health Affairs 23, no. 2 (2004): 43–55.[Abstract/Free Full Text]
13. Raskin, "Health Care, Managed Care Industry Update" (2 April 2004).
14. Sherlock Company, Blues: Dashboard for Blue Financial Management (supplement to monthly Pulse newsletter, June 2004).
15. J. Raskin, "Health Care, Managed Care Industry Update, 2004 Outlook: Spreading Out" (New York: Lehman Brothers Equity Analysis, 6 January 2004).
16. M.E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: Free Press, 1980).
17. J.B. Christianson, S.T. Parente, and R. Taylor, "Defined-Contribution Health Insurance Products: Development and Prospects," Health Affairs 21, no. 1 (2002): 49–64.[Abstract/Free Full Text]
18. A.E. Cuellar and P.J. Gertler, "Trends in Hospital Consolidation: The Formation of Local Systems," Health Affairs 22, no. 6 (2003): 77–87; [Abstract/Free Full Text]B.C. Strunk, P.B. Ginsburg, and J.R. Gabel, "Tracking Health Care Costs: Growth Accelerates Again in 2001," Health Affairs, 25 September 2002, content.healthaffairs.org/cgi/content/abstract/hlthaff.w2.299 (10 August 2004); and C. Capps and D. Dranove, "Hospital Consolidation and Negotiated PPO Prices," Health Affairs 23, no. 2 (2004): 175–181.[Abstract/Free Full Text]
19. J. Raskin, "Health Care, Managed Care, Industry Update: 4Q03 Earnings Preview" (New York: Lehman Brothers Equity Research, 12 March 2004).
20. Boorady et al., "Mergers Will Benefit Buyers and Sellers."
21. M. Borsch, S. Ko, and K.P. Huynh, "U.S. Healthcare Services, Managed Care: Navigating Increasing Competition" (New York: Goldman Sachs Global Equity Research, 5 January 2004); J. Raskin, "Health Care, Managed Care, 1Q04 Earnings Preview: Seeking Answers" (New York: Lehman Brothers Equity Research, 8 April 2004); and W. McKeever and W. Georges, "Managed Care: Steady Pulse to Continued Earnings Growth" (New York: UBS Investment Research, 23 June 2004).
22. Borsch et al., "U.S. Healthcare Services, Managed Care: The Blues and the Underwriting Cycle"; and Borsch et al., "U.S. Healthcare Services, Managed Care: 1Q2004 Preview."
23. Monthly updates on market and regulatory matters affecting the Blue plans are available from Atlantic Information Services, The AIS Report on Blue Cross and Blue Shield Plans (Washington: AIS, no date). See also Sherlock Company, Blues.
24. M.C. Jensen, "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review 76, no. 2 (1986): 323–329; and [Web of Science]M.C. Jensen, "Eclipse of the Public Corporation," Harvard Business Review 67, no. 5 (1989): 61–74.
25. J.C. Robinson, "Reinvention of Health Insurance in the Consumer Era," Journal of the American Medical Association 291, no. 15 (2004): 1880–1886.[Abstract/Free Full Text]
26. J.C. Robinson, The Corporate Practice of Medicine: Competition and Innovation in Health Care (Berkeley: University of California Press, 1999).
27. A.C. Enthoven and L.A. Tollen, eds., Toward a Twenty-first Century Health System: The Contributions and Promise of Prepaid Group Practice (San Francisco: John Wiley, 2004).

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