In the five years to 2016, the Health and Medical Insurance industry's revenue is forecast to increase at an average annualized rate of 5.0% to $865.8 billion, including a 4.4% jump in 2012, according to IBISWorld.

While IBISWorld anticipates that medical-cost inflation will be the primary driver of this growth, increased demand for medical insurance coverage is also expected to play a role. At the same time, industry profitability is forecast to remain under pressure, declining from 4.5% in 2011 to 4.0% by 2016 due to tighter government regulations – particularly once healthcare reform takes full effect in 2014.

Tighter margins will likely inhibit insurers from hiring staff or aggressively expanding operations. As a result, the number of industry operators is forecast to fall at an average annual rate of 0.1% to 923 over the five years to 2016, while employee numbers are only forecast to rise at an average rate of about 0.9% annually to 411,869.

The US Health and Medical Insurance industry has been characterized by slow growth, weakening employer commitment to providing coverage and strengthening interest by public programs to offer coverage through private plans. In the five years to 2011, industry revenue increased at an average annual rate of 2.7% to $677.3 billion. During this period, a consistent increase in healthcare expenditure (i.e. medical-cost inflation) has driven revenue growth but pressured operating profit.

The Obama administration has introduced significant healthcare reform that aims to increase access to healthcare, slow medical-cost inflation and improve healthcare quality in the United States. Many of the legislation's initiatives have already started to affect the industry, but most of the reform is not anticipated to take full effect until 2014. In that year, an insurance exchange will be established that will provide individuals with tools to compare health insurance plans. Additionally, more individuals will qualify for financial subsidies, thereby increasing demand.

Despite debate over medical-cost containment, health expenditures are expected to be the main driver of industry revenue growth over the five years to 2016. In 2011, IBISWorld forecasts that industry revenue will increase 4.1% from 2010. In the five years that follow, revenue is forecast to rise at an average rate of 5.0% annually to $865.8 billion. The majority of growth will likely be associated with medical-cost inflation, but the industry is also projected to benefit from the aging US population. As the baby boomer generation ages, more people will demand and need medical coverage.

Medicare expenditures are expected to increase as the baby boomer generation retires, and growth will come from services related to this government program. At the same time, the private-sector insurance market will benefit from the aging population, with many individuals looking to supplement government coverage with private insurance.

Buy the Full report on the Health & Medical Insurance from IBISWorld.


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