Out Of The Shadows

Middletown, Conn.

Any gardener worth his trowel knows that some flowers quietly flourish in shade even as showier varieties wither in the heat and glare of the sun. Step into Aetna’s garden these days and you’ll be quickly ushered down a path to its thriving group business, well away from its drooping healthcare enterprise, where (no pun intended) mum’s the word.

Waiting for you is Senior Vice President Frolly Boyd, the upbeat transplanted Brit who heads up “the other half” of Aetna U.S. Healthcare.

“It’s somewhat of a surprise in the industry how big Aetna’s group business is,” she tells me, in typically English understatement, “primarily because we’re a little overshadowed by some of the healthcare issues that face us.”

Big business indeed, $1.7 billion worth, covering 12 million members, principally in the large employer category. Which makes her operation, by her own estimate, the fifth largest in the highly competitive group business.

“What intrigues me as we move through this decade,” says Frolly Boyd, “is the convergence of health and income protection issues.”

She points, for example, to those breakthroughs in breast cancer, prostate cancer and heart disease which have us living longer with chronic conditions that impact our ability to earn money and protect the future. “There’s an interesting link that was perhaps lost 15 years ago when these two types of product lines diverged,” she says.

“Part of creating a new Aetna is leveraging the strengths of a health company in that world of converged issues and developing potentially hybrid products that would serve the needs of both employers and consumers.”

Among the other issues facing group insurers, she says, is the trend toward customers paying more of their benefits costs, which is happening slowly in healthcare, more quickly in group. So the fair deal, the affordable price, is a growing concern, as is the need for information on getting older and getting sicker.

Long-term care, which the government has made clear is a personal responsibility, is “a huge unfunded liability” and “a time bomb waiting to go off,” she says. It’s also a growth opportunity. “The ignorance factor around how the government does or does not pay for long-term care is staggering in its proportions,” she says. “Carriers have a unique opportunity to be on the right side of that issue and help develop solutions.”

Once people pay for these products themselves, she thinks we’ll see increased demand for services that are not just hassle-free but empathetic as well, sympathetic to the trauma that accompanies serious healthcare crises.

All this, she says, has Aetna moving away from traditional product “stovepipes” and focusing on employer and consumer sectors to better address their specific needs.

For example, employers are newly concerned about their fiduciary roles as employees pay more, so Aetna provides a customized Web site that employers can visit directly and learn how to calculate exactly what they need in various products and how much they will cost. As for enployees, they need help in understanding how they incur costs and how they can reduce them.

Boyd also points to the changing nature of disabilities–there’s big growth in stress-related disabilities–and the opportunity to help employees prevent occurrences. “We’re leveraging prevention programs we use in healthcare and are using them in connection with disability.”

Another challenge, she says, is how to extend coverage to market segments that have historically not been as well covered as they should be. “There is an issue of uninsurance and underinsurance in group benefits that is parallel to, if not worse than, healthcare,” she says, noting that 45% of smaller-company employees don’t have disability cover, fewer than eight million have LTC coverage, and the volume of life coverage is less than desirable.

To meet this challenge, she says, Aetna is looking at traditional and nontraditional approaches-on the one hand, using brokers to offer more tailored products to middle-market segments; on the other, using e-brokers or Internet to market direct to small businesses.

I ask her about the impact of Aetna’s financial woes on her operation. “Fortunately, we have not seen any adverse impact,” she responds. “Clearly, to the extent that one’s in the paper, there are issues around healthcare that create some debate. But the group business has been around a long time. It’s well capitalized, it’s steady, it’s stable, it’s been a part of Aetna for over 150 years. Many of our customers have been with us for 50, 60, 70 years. They understand we have difficulties, but it’s pretty well accepted by the street and by our shareholders that we have a strong balance sheet and a plan to adjust and that we can see this through.”

The future?

“This marketplace has been under the shadow of healthcare for some time and is now emerging, particularly in the consumer’s eyes.”

Frolly Boyd clearly expects to flourish in the sunlight too.


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 10, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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