Health Insurance companies are preparing themselves to gain new business from policy changes which are likely to be approved with the Democrats control of Washington.

It is expected that the democrats will expand federal programmes that cover low-income children and adults, which are the groups that insurers commonly contract to direct via private Medicaid plans.

A study showed that health insurance industry’s revenue could actually increase with a small decline in profit margins. H. Edward Hanway, chief executive of Cigna Corp stated: “We do see opportunity. I think it's also fair to say we expect some increasing regulation. We're very focused on being an active voice at the table and talking about what kind of reform makes sense.”

However, with the credit crunch, feelings are running high, and there are worries that the Democratic Party with its cost-cutting ideas will actually dent health insurer’s profits and these fears have been linked to some of the group’s steep falls in stock prices this year.

Although the agreement on how to pay for expanded health coverage may prove difficult for the new president and congress, the health reforms already have the support of business groups.

Humana Inc, which is the biggest provider of Medicare Advantage Plans have introduced premiums for customers for the first time as part of a longer-range effort to direct people into policies that rely on doctor networks and hospitals in an attempt to manage medical costs.