Should we all feign shock?
Or would that be too obvious? Aetna is planning on dropping 600,000 to 650,000 people from their private-for-profit insurance coverage - the sickest people, of course - in order to help ensure they drive up the cost of the Public Option while still keeping their profit margins with "redesigned plans" - you know, higher premiums and or less coverage - and some will be shocked by this. Many of us knew this was one of the many poison pills they have built into healthcare reform. This is one of the many reasons that if you are going to go the "Public Option" route that it has to be available from day one, and it has to be opened up to anyone that wants to participate. Below the fold, PNHP weighs in on this news.
This entry is from Dr. McCanne's Quote of
the Day, a daily health policy update on the single-payer health care
reform movement. The QotD is archived on PNHP's website.
By Emily Berry
American Medical News
November 30, 2009
Back when it was the largest private health plan in the country,
Aetna downsized its membership by millions but boosted profits during
an overhaul of its business several years ago.
Now it looks to be making a similar — but smaller — move with a planned price increase for many of its customers in 2010.
The company figures it will lose between 600,000 and 650,000 members next year because of the price hikes.
In a conference call with investment analysts to discuss the
company’s third-quarter earnings, Chair and CEO Ron Williams told
analysts, “The pricing we put in place for 2009 turned out to not
really be what we needed to achieve the results and margins that we had
historically been delivering.”
Aetna President Mark Bertolini laid out how the company planned to
raise prices to improve the company’s profit margin. He said the firm
had “implemented a combination of underwriting enhancements, pricing
actions and plan design changes, intended to ensure that each customer
is priced to an appropriate margin.”
Laying out specific expected membership losses is “pretty candid,”
said David Gibbs, a retired health insurance industry consultant from
San Luis Obispo, Calif. He worked for and consulted with health
insurers, including Aetna, for 25 years.
He said Aetna’s decision comes from a system that encourages
insurers to drive away sicker members — a strategy not unique to one
insurer. “They’re running a business, and their obligation is a very
singular one: to increase shareholder profits.”
Gibbs said simply raising prices probably would not get Aetna what
it wants. That actually tends to result in sick people who are more
“desperate” for coverage to keep it, and healthier groups to drop it.
Instead, Aetna might change benefit designs, scaling back prescription
drug coverage, for example, which sicker populations tend to value but
healthier ones don’t notice as much.
This act by Aetna indicates the level of sincerity the insurance
industry has in its alleged new effort to cooperate in ensuring that
everyone has the health care coverage that they need. Aetna is
redesigning and repricing its products in order to dump over 600,000 of
its less profitable members. They need to be sure that “each customer
is priced to an appropriate margin.” And, above all, they owe it to
their shareholders “to drive away sicker members.”
But that’s one of the ways that markets work – improve profits by
cutting losses. We keep hearing that markets improve quality while
reducing costs, yet in a bit of irony, for those healthier populations
that remain with the Aetna, the insurer is reducing quality through
product redesign, and increasing costs through higher premiums.
Once Aetna dumps these members, what private insurer is going to
jump in to capture this higher cost population? None you say? And under
reform? The higher cost individuals buy into the weak public option
driving premiums up through adverse selection to even more unaffordable
Try to imagine Medicare dumping over 600,000 patients because they
need more medical care. That is unthinkable and would be reprehensible
in a public social insurance program such as Medicare. Yet for the
private insurance industry, it’s business as usual. And President Obama
and Congress want to keep these marketeers in charge? Talk about