Sunday, February 26, 2012

"The end of insurance here."

For awhile now I've been following what Rick Unger has been saying about the ACA triggering the end of for-profit health insurance companies as a business model.

This week Mark Bertolini, CEO of Aetna, agreed with him.

It’s not often that you hear the leader of a Fortune 100 company publicly acknowledge the imminent demise of his venerable, profitable business model.

Yet, speaking at the HIMSS12 Conference in Las Vegas, Aetna CEO, Chairman and President Mark Bertolini, said a reckoning for the traditional health insurance model was at hand. “The system doesn’t work, it’s broke today” Bertolini told attendees. “The end of insurance companies, the way we’ve run the business in the past, is here.”

Bertolini said an amalgamation of regulatory, demographic and economic factors were driving this change. The Affordable Care Act in particular, with its ban on medical underwriting, has made the traditional health insurance business model untenable in the long term, he said. Nonetheless, he offered measured praise for the law, even citing the controversial medical loss ratio rules as having a smoothing effect on premium swings. “We got pulled through the crucible against our will and have been reshaped because of it,” he said. “For most of what has already been implemented, it has been a pretty good thing.”

First of all, I'll let Unger fill us in on what "medical underwriting" means.

Underwriting is the process of separating out the healthy from those more likely to be ill and then offering coverage to the good risks while passing on the bad ones.

In other words, the universality of ACA means that insurance companies can no longer pick and chose their customers to maximize profits (ie, no exclusions for pre-existing conditions). In addition, the medical loss ratios - as I've talked about before - require insurance companies to spend 80-85% of their premium dollars on patient care. Together these kinds of regulations are what both Unger and now Bertolini say will mean the end of the for-profit health insurance business model.

For months now the baggers of fire on the left have been shouting about how the ACA was nothing more than a give-away to these companies. Oh my, how much more wrong could they be?

Now we're beginning to see the "long game" play out on where we might be headed with health care reform. Unger says it will eventually lead us to some type of single payer system. But he has this warning...

If you are a single-payer advocate—and it is no secret that I fall within this category—you are likely pumping your fist in the air at this news. After all, when the CEO of one of the nation’s largest health care insurers waves the white flag, it’s got to be a good thing for those who wish to usher in the era of universal coverage.

To you single-payer supporters who are enjoying Bertolini’s perceived capitulation, I would simply say, “chill out.”

While I have long argued that the for-profit health insurance model no longer works, and that some form of a single-payer system is—whether you like it or not— inevitable, the simple fact is that we are no more ready to make single-payer a success in America then we are capable of sustaining the existing for-profit model.


Because our healthcare cost issues are going to be as damaging and deadly to a single-payer approach as they have been to the for-profit business model.

So we're not there yet but we're on our way. As the saying goes..."the journey of a thousand miles begins with the first step."

Here's what Bertlolini had to say about that:

Reform is not going to stop. It won’t go away.

Thanks Obamacare!

1 comment:

  1. As a 25 year health care provider, this is way overdue. Nationalizing the insurance companies would have created the same results, but as Pres Obama has said, that would have likely destroyed the whole system. This is is more slow, and less disruptive. Great post, as always.


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