Insurers' Tarnished Reputations Shine

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Some hospital executives aren't too fond of insurers. That's the word from a Davies Public Affairs-commissioned study, as reported by the L.A. Times. Should investors care? Nope.

In the study, UnitedHealth Group (NYSE: UNH) scored the worst, with an "unfavorable" opinion from 91% of the hospital executives who responded, while just 8% gave it a "favorable" rating. WellPoint (NYSE: WLP) and Cigna (NYSE: CI) also received more unfavorable than favorable ratings.

Aetna (NYSE: AET) scored the best, with 57% favorable and 37% unfavorable. CoventryHealth Care (NYSE: CVH) also had a positive rating in the survey.

Sure, the bad press from the coverage of this survey, as well as threats of lawsuits from the New York State Attorney General and raids by the FBI, has tarnished the industry's image. But how many people actually get to pick which health-care provider they use? In my experience, employers most often do the choosing. Any choices employees get usually come down to price versus coverage, with the insurers' reputation having little bearing.

Indeed, it seems like the lower-ranked companies are doing better financially. Hospital executives' dislike for a company could mean that the insurer is driving a hard bargain, getting good deals on services the hospitals provide. Sure, if things got ugly enough, hospitals could refuse to take a specific company's insurance, but for larger insurers with millions of members, that seems unlikely.

As the cost of health care rises, price will become an ever larger factor in determining which insurers are able to pick up additional members. For better or worse (depending on whether you're a shareholder or a member), I think the industry is becoming largely immune to negative media attention.