1. R A F A E L M A R T I N E Z
R Y A N S U G A R
G R E G G S C H W A R T Z
J E S S I C A L A N G E
A L I B E T R O N E - H A R P S T
G-JARR Team

2. 160 Days

3. Executive Intro
 This report begins
explaining:
 The industry’s
dominant economic
features, key success
factors.
 Porter’s 5
Forces, Drivers
of change.
 The top companies,
prospects for the long-
term profitability.

4. Problem
 Is the industry attractive?
 Industry’s Attractiveness
 Porter’s 5 Forces – star ranking (3-star)
 Prospects for Long-Term Profitability
 Premiums adjusted to expenditures
 Optimize premiums and expenses

5. Key external Drivers: (1) Health expenditure
• Expected to increase, creating opportunity for the
industry
• Includes public and private spending that promote and
prevent diseases
• Growing burden of chronic diseases that are
preventable
• Obesity accounts for approximately 12% of health
spending in recent years
• Source: Aetna

6. Chronic conditions were leading causes of death
among U.S. adults aged 65 or older in 2007-2009

7. (2) Aging Population
U.S. population aged 65 or older, 2010-2050

8. Medicare Adding to Federal Deficits Faster than
Other Government Programs
Medicare is the fastest growing program due
to retiring baby boomers, effects of an aging
population and rising healthcare costs
Source:
Congressional Budget Office, 2012

9. (3) Regulations
 Healthcare reform designed to expand insurance coverage
 Uncertain who will join the network & if enough young people will sign up to cover the
risk of elderly & ill
 Causes more acquisitions and mergers for companies
 Influences companies increase marketing tactics & educating the public
 UnitedHealthcare (number one medical insurer) opens its newest health benefits store in
Chinatown, New York, continuing the company's nearly 20-year commitment to serving
local residents with comprehensive and personalized customer service.

10. Drivers of Change in the industry
 Affordable Care Act
 Cheaper premiums for lower income households
 Businesses with more than 50 employees must
provide their full time employees with health
insurance
 Should reduce the number of Americans that
currently do not have any coverage what so ever,
leading the health insurance industry to long term
profitability

11. Drivers of Change in
the industry
 Technological Advances
in the Medical Field
 New tests and cures for
diseases that we once
believed were
untreatable
 Average life expectancy
continues to rise

12. Key Success Factors
 Key measurements that lead to a competitive
advantage
 Premium revenues, medical loss ratio, administrative and
other expenses, profit margins, and earnings per share
 Acquisition impact
 Provider relationships
 Measure relative financial health

13. External Analysis
Key Take-Away’s
 ACA – larger pool
and barriers of exit
 Consumer focus
 43.8% industry
revenues
concentrate within
top four firms
 Economies of scale
essential
 Moderately
Attractive /Avg 2.6
Industry
Attractiveness
***
Intensity of
Competitive
Rivalry
*
M&A
Threat of
new Entrant
****
Economies of
Scale
Bargaining
Power of
Suppliers
*
Health care
providers –
relationship, rising
costs, and errors
Bargaining
Power of
Buyers
****
Government
involvement
Threat of
Substitute
***
Walk-in clinics

14. Emerging trends
 Chart
 Advertising
 Mergers and Acquisitions
 Healthy lifestyles instead of prescriptions
 Categorize trends as long-term or short-term

15. Strategic Group Map
0
2
4
6
8
10
12
-5 0 5 10 15 20 25 30 35 40
Strategic Group Map
Cigna
Anthem
Empire Coventry
United Health
GroupHumana

16. Solution
 Differentiate with customer-oriented strategy
 Store that you know about (future direction)
 Put a face to the customer
 Economic Indicators
 (1) total health expenditure
 (2) age of the population
 (3) regulations