Aetna's Ron Williams on Health Care: What to Expect

Nixon couldn't do it. Clinton couldn't do it. But on Mar. 23, after decades of debate, lobbying, and political wrangling, Barack Obama signed health reform into law. What does this new mandate mean for individuals, companies, and the health-care industry? On Mar. 24, I talked with one of the executives on the firing line, Chairman and CEO Ron Williams of Aetna (AET), which provides health-insurance benefits to more than 36 million Americans.


How do you assess the health-reform bill just signed by President Obama?


I think it is a significant milestone because it will give millions of people access to health-care services. I would probably have done things a little differently. But this is now an opportunity to get to work on the fundamental affordability of health-care services, [because] the mischaracterization of our industry as the problem really didn't permit us to work in a collaborative way.

My impression is that the President listened to doctors, nurses, insurance companies, and every other element of the health-care community.
There was good dialogue, but for a variety of reasons there was a point in the dialogue—in the summer—when the focus shifted from health-care reform to health-insurance reform. But it's not too late. We're committed to looking beyond where we are now and getting back to what we need to do to really achieve affordability.

Will insurance premiums go up?
The answer is yes, and some of the things that will drive those premiums are significant additional taxes the industry will ultimately have to pay in the first year.

The President said that this bill would not have any impact on people who already had coverage, that it was about the uninsured, that there would be no change. Will this legislation change the coverage of people who are already paying for it?
My perception is, yes, things will change. You might not have a plan that includes the exact same doctors. You might have plans that have richer benefits, and therefore you're going to pay more for benefits you may or may not want. It would have been a better message to say, we're going to make certain you maintain your eligibility.

Clay Christensen of Harvard Business School said recently that in health care, competition does not help control costs but rather drives them up. He said the structure of the system pits hospitals that want to fill their beds against insurers that want to minimize reimbursement and access. His answer was the health-care provider and health-care insurer should be one and the same, suggesting an integrated system like Kaiser Permanente in California.
Well, I think it's an interesting idea. But all health care, ultimately, is local. There are communities where that model has worked well. Kaiser and Group Health of Puget Sound are examples of where that's worked very well. But it requires a unique physician culture. And even firms like Kaiser, which has tried to expand into other geographies, have found that it's incredibly hard to replicate. Where it can work, it's a fine model. It's just not going to work in most communities.

During this year of debate that you talked about, there was a moment in which Health & Human Services Secretary Kathleen Sebelius was concerned by Anthem Blue Cross in California proposing a 39% rate hike and wanted an answer from the insurance company and the industry as to why this was happening? Was it justifiable, especially at a time of recession? What was the answer?
I'll leave it to others to explain the exact increase, because it wasn't our firm that was doing it, but the generic answer I gave the Secretary was first you had an increase from the underlying rate of medical costs—inflation from hospitals, physicians, drugs, devices, technology. You then had the fact that as a result of the economy, healthy members who had been insured for some time but found themselves in tight economic circumstances were canceling their insurance. So you lose the subsidy that is keeping the premium affordable for the insurance pool. At the same time you had a third factor: Healthy young members, as a result of the economy, not entering the insurance pool. Finally there is simply the aging of the population in the insurance pool. And I think that to blame the premium on the health plan really doesn't get at the underlying forces.

Do you feel like the insurance industry was demonized in this debate that took place over the last year?
Yes, I do. And I think our 35,000 employees at Aetna were perplexed and really, I think, very disappointed in the leadership of the country and their selection to demonize and impugn the motives of employees, doctors, nurses, and pharmacists.

By that, you mean the President.
I mean everyone involved.

A Wall Street Journal editorial on Mar. 22 said the first result of reform will be turmoil in the insurance industry, and as small insurers find it impossible to make money, a wave of consolidation is likely. You've already said premiums are going to go up. Are we also going to see consolidation?
I'm much more worried about the solvency question. If you're a small plan and you experience costs that you simply weren't able to price for, there could very well be insolvencies. It's been a long time since we've seen them in the insurance industry, but the insurance commissioners know what can happen.

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