Title

Examining the Existence of the Underwriting Cycle in Managed-Care Organizations

Department

Economics, Finance, & Quantitative Analysis

Document Type

Article

Publication Date

Fall 2000

Abstract

This article examines the existence of the underwriting or profitability cycle in the health insurance industry. Researchers have reported that a six-year cycle exists for health care insurers. That is, three years of profits then are followed by three years of losses. This article suggests that insurers react more quickly to losses and adjust their cost structures almost immediately. Health insurers react to both expected changes and current increases in the payoff ratio.

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