The poor economy has led to rising and persistent unemployment, belt-tightening and a lower standard of living for many Americans. But this cutting back hasn’t been bad for everyone. As consumers put off medical care like doctor visits and surgery or were dropped off private insurer rolls altogether, some of the country’s largest health insurers actually saw profits rise.

Last week, UnitedHealth Group, the nation’s largest private insurer, reported a 13% increase in net profits and earlier this week Aetna (the third largest insurer in terms of market value) reported that its second-quarter net income rose 9%. According to Reuters, Aetna’s stock shares are up about 40 percent this year as well.

WellPoint, the second-largest health insurer, reported a 3% drop in second-quarter profits as medical costs for its growing Medicare Advantage business have come in "significantly higher" than the company expected this year. WellPoint, which is making a calculated foray into Medicare and betting on the demographics of the baby boom generation, was hit with an unanticipated enrollment of sicker (i.e. more expensive) subscribers over the age of 65 into its MA plan in California as other players pulled out of the market. Bloomberg reports that the percent of income Wellpoint spent on care in increased to 85.7 percent from 82.9 percent a year earlier.

Still, the company’s shares climbed roughly 30 percent this year as enrollment increased overall, (compared with the S&P 500 index rise of only about 6 percent) and WellPoint management raised their 2011 earnings estimate for the second time this year.

What’s the reason for the rosy outlook for large insurers?

It turns out that in light of our faltering economy and concurrent rise in insurance premiums, Americans are simply delaying or putting off altogether doctor visits and medical procedures. They are facing heftier out-of-pocket expenses in the form of co-pays and high deductibles (passed along by employers who have seen premium increases in the double digits) at the same time that unemployment is rising and the economy is stagnating. Lower utilization of health care providers and services add up to reduced outlays by insurers and employers. Insurers, faced with new rules requiring them to spend more on actual medical care and less on administrative costs have also become more efficient.

Wall Street clearly sees this as an encouraging sign: “The results, combined with greater investor comfort in the fallout of the U.S. healthcare overhaul, has spurred strong stock price gains this year,” according to Reuters.

In a Standard & Poors report that Maggie discussed in her last post, David M. Blitzer, Chairman of the Index Committee at S&P Indices notes, “In terms of what we are hearing from market participants, both office visit and hospital admission trends are relatively low, which may be a reflection of the overall consumer pullback in medical treatment.

"Furthermore, many participants have indicated that providers are trying to address health care reform and are looking for ways to control costs. If true, this combination certainly would be a contributory factor to the moderation in cost we have witnessed since early 2010.”

Are these the consumer-driven health care savings we’ve been hearing about from conservatives who bemoan the lack of “skin” most Americans have had in the market? Are people putting off doctor visits and interventions that would have been unnecessary or “wasteful?” Is this a sign that we are finally starting to “trim the fat” from health care spending?

I think not. In fact, I think this decrease we’ve seen in health care utilization is more likely a form of economic “rationing” that is occurring at a personal level. In 2008, the Center for Studying Health System Change (HSC) found that the number of Americans who reported going without or delaying needed medical care increased sharply between 2003 and 2007. In fact, a study found that “one in five Americans—59 million people—reported not getting or delaying needed medical care in 2007, up from one in seven—36 million people—in 2003.” The table below offers details on which aspects of care Americans have cut back on (Click on table to make it larger).

Interestingly, HSC found in their study that insured people experienced a larger relative increase in having problems accessing care than uninsured people. Also, those who reported being in fair or poor health were more likely to skip needed care than their healthier counterparts. According to Paul B. Ginsburg, president of HSC, “There is no doubt that people with high deductibles and copayments delay seeking care, sometimes dangerously, and they have lower refill [of medication] rates.” He adds that in the long run, “There is a strong probability that [delaying care] affects overall health costs.”

The recession has had a clear impact on private health care spending even in 2010, according to a report released today on Health Affairs by the Office of the Actuary at the Center for Medicare and Medicaid Services. The authors found that;

“Private health insurance spending growth is estimated to have been just 2.6 percent in 2010 as the number of people enrolled in private plans fell by roughly 5 million. Moreover, out-of-pocket spending climbed just 1.8 percent (after 0.4 percent growth in 2009) as many people continued to restrain their use of health care goods and services.”

Even some hospitals are feeling the pinch. Although many continue to report healthy earnings, earlier this week, HCA Holdings, the country’s largest operator of for-profit hospitals, reported an unexpected drop in earnings despite the fact that admissions for all reasons increased about 1.9 percent in the quarter and visits to emergency rooms were up even more, rising 4.5 percent. But, according to a report on NPR, when “the company looked at surgical admissions hospital by hospital, it found they declined 1.6 percent in the U.S. in the second quarter compared to the same period last year. Inpatient surgeries took a bigger hit than outpatient cases, but both were down.” One possible reason: “some people appear to be forgoing surgery, in part, because of hard economic times.”

Reuters reports that insurers with significant Medicare businesses are also seeing their shares decline in value “as analysts said investors were additionally concerned the budget deficit talks could lead to legislation that hurts Medicare reimbursement.”

But as the effects of the recession lessen (this typically happens 18 months into a downturn), write the Health Affairs authors, private health care spending will increase in the next few years—up to 4.8% by 2013 as more people are employed and covered by corporate plans and have greater disposable income to spend on out-of-pocket medical expenses. (I am not an economist, but I wonder if the recession really will lessen to such an extent that hiring does pick up, more people are insured and ready to start spending again. Certainly the events of the last few weeks and the growing uncertainty over the debt ceiling crisis make it hard to imagine such a dramatic turn of events.)

The CMS actuary report has projections for growth in health care spending out to 2020 and can be accessed here. But its overall finding is that the slowdown in national health care spending could be fleeting; “National health spending is expected to grow 5.8 percent per year for the period 2010 through 2020, 1.1 percentage points faster than the expected average annual rise in gross domestic product.”

These are unpredictable times for the health care industry. In both dominant budget deficit reduction plans circulating in Congress (Boehner’s and Reid’s), Medicare and Medicaid will essentially remain untouched at least until the end of this year.  But as Maggie reported earlier, in the Boehner plan “[a] new, joint House-Senate committee of 12 lawmakers would then be mandated to come up with another $1.8 trillion in deficit savings over 10 years by Christmas.” That will not allow time for the fundamental changes associated with health care reform to fully kick in, leaving the door open for cuts to both government health care programs. Reid's plan also calls for a committee to identify further budget cuts, but not until after the election.

In 2013 health care exchanges are set to begin operating and Medicaid will expand coverage to millions of currently uninsured Americans. It is likely that many of the plans offered both through employers and the exchanges will eventually require greater cost-sharing—especially for overused tests and treatments—and will continue the trend toward higher out-of-pocket spending for many Americans. If health care reform is allowed to proceed as planned, the CMS actuary report has utilization and health care expenditures peaking in 2014 as the formerly uninsured finally gain access to services. But the emphasis on evidence-based care, accountable care organizations, avoiding waste, over-treatment and outright fraud should eventually lead to a decrease and then leveling off of utilization and expenses. This time the decrease will likely be due to a more rational use of what we all agree are limited resources, not driven by Americans delaying or forgoing needed care because they just can’t afford it.