Can a universal coverage system temper the underwriting cycle?

The health insurance industry has experienced a pronounced six-year cycle of earnings for nearly three decades--three years of profits followed by three years of losses. This profitability cycle triggers a turbulent pricing cycle. After reviewing three schools of thought about the causes of the cycle, in this article we examine new evidence to determine the probable impact on the cycle of a private-public, universal coverage, national health plan. We find no evidence of a cycle in the pricing and use of health care services. Since 1985, the relationship between the overall economy and health insurance trends has weakened. We conclude that the root causes of the cycle are essentially internal to the insurance industry, and, therefore, national health care reform will have little impact on the underwriting cycle.