How Aetna’s CEO thinks about Obamacare

January 17

Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoon for the latest edition or sign up here to receive it straight from your inbox. Read previous columns here.

SAN FRANCISCO — Aetna chief executive Mark Bertolini spoke Wednesday at the J.P. Morgan Health Care Conference — and he had a lot to say about the health-care law's rollout.

1. The early exchange demographics are actually better than expected. Bertolini's take on the age-breakdown of marketplace enrollees was really interesting — and different from the reaction in Washington. While most of us journalists pointed out that the Obama administration is falling short of its young adult enrollment target, that doesn't really matter to Aetna. What matters to a health plan is who they expected to sign-up, and what type of age mixed they used to set their premium prices.

"Given the general demographics that CMS released yesterday, I'm not alarmed," Bertolini says. "They're better than I thought they would have been."

This is, incidentally, an idea that other insurance executives brought up this week: They don't really care what goal the White House set for young adults. What matters to them — and what will determine if rates need to increase next year — is who they expected to sign up.

“Things aren’t necessarily way out of whack with our expectations,” Wellpoint's chief financial officer Wayne DeVeydt said at a separate presentation. “It’s not about whether or not you're getting a sicker book. It’s whether you priced for it.”

2. Many enrollees still haven't paid their insurance premiums. Bertolini estimates that, as of Jan. 15, a significant number of exchange enrollees have not made a premium payment. "The 50-70 percent range people who paid is a good ballpark," he says.

(Update: An Aetna spokesperson clarified that Bertolini's comments were meant to refer to the entire exchange population, not just Aetna's enrollees. Aetna, according to their spokesperson, has had over 70 percent of exchange enrollees pay their first month's premium).


3. Exchange business is small now. ... Aetna is selling on more marketplaces than any other insurance plan but, even so, the individual market is a relatively small part of its overall revenue. Bertolini didn't break out that number specifically, but you get a sense of it from this chart, which shows that 16 percent of Aetna's revenue comes from small business and individual policies, sold both on and off the exchange.

This is another reason why you don't hear Aetna or other insurers panicking about the rocky rollout of Obamacare as much as you might expect. "It doesn't have a material impact on our business," he says, "But it gives us  the opportunity to play across a spectrum of products."

4. ... But it's going to get big later. Bertolini predicts that 75 million Americans will purchase their health coverage through an exchange by 2020.


This won't all be through the Obamacare exchanges, but a good chunk will happen among private employers. You see this starting already, with companies giving their workers' a set chunk of money to choose between a variety of health plans. This is similar to how the exchanges work, except is the federal government rather than the employer paying the subsidy.

"In a system where you have two, three or four choices people are chronically overinsured or underinsured," Bertolini says. The idea with an exchange is shoppers would have an incentive to choose a less costly plan if they felt like they didn't need it — namely, that their employer was only putting in a set amount of money regardless of how expensive the plan premium was. 

KLIFF NOTES: Top health policy reads from around the Web.

Finding mental health services is getting harder for patients. "Last year, according to the U.S. Department of Health and Human Services, almost 91 million adults lived in areas like here where shortages of mental-health professionals made obtaining treatment difficult. A departmental report to Congress earlier this year said 55% of the nation's 3,100 counties have no practicing psychiatrists, psychologists or social workers, a combination of budget cuts and doctors leaving the profession." Gary Fields and Jennifer Corbett Dooren in the Wall Street Journal.

HHS was thinking about dumping CGI in December. "The White House spent December talking up its revamped and repaired HealthCare.gov Web site after the disastrous rollout. But health officials worried that the underperforming contractor could still derail Obamacare and destabilize the insurance industry, according to a new federal document. The concerns grew so acute that they decided to seek a new contractor." Kyle Cheney in Politico.

No, Obamacare isn't a bailout for health insurers. "Conservatives might object to reinsurance and risk corridors on principle, regardless of amounts involved. That would be a perfectly legitimate argument, except for one thing: Reinsurance and risk corridors are already a feature of some government programs, most prominent among them Medicare Part D. The reinsurance and risk corridors in Obamacare and Medicare Part D are remarkably similar, except that Obamacare’s are temporary and Medicare Part D’s are permanent — which is to say, they are still part of the program." Jonathan Cohn in the New Republic

 

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