Conning Research Says Small Health Insurers Continue to Fade from the Market

March 14, 2005

The number of small managed care organizations will likely diminish slowly over the next several years as consolidation continues, according to a new study by Conning Research & Consulting Inc.

“The small insurer segment currently controls less than 10% of health
insurance premiums in the U.S.,” said James Smith, analyst at Conning Research & Consulting. “While the remaining small companies show modest but consistent growth, profitability has been more erratic. This continues to make them targets for the larger and stronger companies looking to round out their offerings. Even for profitable small insurers, long-term independence is not guaranteed. Larger insurers seeking to expand market share often look to acquire successful companies that have established sound local and regional
relationships with hospitals and providers.”

The Conning Research study, “Small Health Insurers: Long-Term Survivors or Lunch-Time Snacks,” reviews the state of the small medical insurer in the U.S. The analysis is a regional look at the industry, highlighting some key differences in regional opportunities for niche players.

“Small health insurers are highly dependent on Medicaid programs for the small share of market that they have managed to keep,” said Stephan Christiansen, research director at Conning Research & Consulting. “Margins have recently been better in this market. However, the distinct advantage held by larger MCOs in investment performance makes the current environment an especially risky one for the small health insurer.”

“Small Health Insurers: Long-Term Survivors or Lunch-Time Snacks” is
available for purchase from Conning Research & Consulting Inc., by visiting the company’s Web site at

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