Insurers Catch Flu Bug

It's not a bad time for insurance companies to come down with a case of the swine flu.

The cost of treating and preventing the flu is adding to medical claims, which means health insurers are reporting lower earnings this quarter even as Washington lawmakers accuse them of having inflated profit. Profitability has been a flashpoint in the debate over health reform.

Amerigroup Corp., which administers Medicaid and other government plans, says it didn't meet it target for third-quarter profit because of high flu-related costs in September. Last week, UnitedHealth Group Inc. said flu claims cut into profit and may have an impact on fourth-quarter income. Other insurers, including WellPoint Inc. and Aetna Inc., report earnings this week.

While the flu trends are severe, they may "conveniently" have an impact on profits for the second half of this year, Thomas Carroll, a Stifel Nicolaus analyst in Baltimore, writes in a recent note to clients.

"Influenza impacts health plan profits on an annual basis, and given reform activities, (health insurance) managements may overly emphasize the potential impact," Carroll says.

The government is behind in its effort to distribute the vaccine and more than 20,000 people have been hospitalized, according to Amerigroup. The Virginia Beach, Virginia-based insurer is particularly hit hard because its customers are among the most at risk, children and pregnant women.

"It is difficult to determine if, and when, the situation will abate, continue at current trends, or worsen," Amerigroup CEO James G. Carlson says in a statement.