The Realities of Health-Care Reform

By Ronald A. Williams and Troyen A. Brennan
Tuesday, July 10, 2007

The Centers for Disease Control and Prevention released a report last month noting that the number of adults without health insurance increased by 2 million from 2005 to 2006. Given this and other news, we believe this is a good time for a reality check on health-care reform.

The question is why there appears to be a presumption that our industry might be opposed to reform. We see this appearing in three areas.

First is with regard to medical underwriting in the individual market. Sens. Barack Obama and Hillary Clinton support guaranteed issue of insurance and a halt to "cherry-picking" of subscribers. We do consider individual (as opposed to group-based) members' health histories before contracting for insurance in the states where this practice is allowed. Without this approach, all would wait until they anticipated spending more for health-care services than the cost of their premiums. We are open to discussing guaranteed issuance -- no medical underwriting -- when there is a mixed-risk pool. But without an enforceable mandate for individuals who can afford to purchase health insurance -- which we have advocated for four years -- the individual market is prone to adverse risk, and the policies quickly become unaffordable.

The second area of contention relates to Medicare Advantage, where plans are described as reaping benefit from Medicare's decision to put more funds into private fee-for-service programs. We think this view misses the point. At Aetna, we believe we can demonstrate that we provide these services at less cost than government can offer on its own. In fact, we are showing in demonstration projects that our clinical programs can improve quality and reduce costs for Medicare beneficiaries as well as lower costs for the government.

The third issue is health-plan profitability. In 2005, the major for-profit health plans averaged about a 6 percent profit margin after taxes. This is less than many other for-profit sectors in health care; less than the margins at many not-for-profit health-care institutions; and far less than the numbers recently bandied about. We expect that our customers are equipped to judge whether we are adding substantial value through our efforts to promote effective and efficient health care.

Yet the suspicion remains, perhaps partly because an aspect of our job in serving our employer customers is to control demand and manage health-care costs. We enforce language in employer contracts that defines health benefits coverage, and we do not pay for care that is unnecessary according to the best evidence-based guidelines produced by medicine. We strive to eliminate waste and promote health.

In the American health-care system, no one really wants to hear the word no. Few politicians want to be identified with limiting health-care resources. Yet all the candidate proposals we have reviewed recognize that our profligate system cannot continue on its current course, certainly not with a rapidly aging and ever less-healthy patient population. The alternative to curbing costly waste is further growth in the uninsured population.

We believe that health-insurance providers can promote health, improve quality and reduce costs, thereby creating the means to provide universal access. We are glad to see presidential candidates support these same goals. We hope that politicians and the public recognize that providing access to care that is proven effective and efficient is going to be critical to meaningful reform, and that health plans have real expertise to bring to the table.

Ronald A. Williams is chairman and chief executive of Aetna. Troyen A. Brennan is Aetna's chief medical officer.


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