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Health insurance company executives are saying one thing about the Affordable Care Act during earnings calls – and something else in the warnings in their SEC filings.

Ronald Williams, the outgoing chairman of Aetna Inc., Hartford, talked about the opportunities the act could create during his company’s 2010 call.

“2010 will be remembered as a year that brought historic changes to the health care and health benefits industries,” Williams told securities analysts. “We are confident in our ability to continue to manage our business through the changes brought about by this law, while focusing on creating value for our customers and shareholders.”

Aetna is eager to do business with individuals who will be flowing into Medicaid and individuals who are supposed to be buying coverage through the new health insurance distribution exchanges, Williams said.

Likewise, Stephen Hemsley, president of UnitedHealth Group Inc., Minnetonka, Minn., declared that the federal health reform laws “respond to underlying and long-standing challenges in the health care system.” “The next wave of growth opportunities will come to those who fundamentally help make the health care system work better, in a more sustainable way, for everyone,” Hemsley said.

In the risk factors section of the 2010 Form 10-K, however, UnitedHealth painted a chillier picture of the world that the Affordable Care Act could create.

The act “could restrict revenue and enrollment growth in certain products and market segments, restrict premium growth rates for certain products and market segments, increase our medical and administrative costs, expose us to an increased risk of liability (including increasing our liability in federal and state courts for coverage determinations and contract interpretation) or put us at risk for loss of business,” UnitedHealth said.

Humana Inc., Louisville, Ky., warned that the Affordable Care Act “could have a material adverse effect on Humana’s results of operations, including restricting revenue, enrollment and premium growth in certain products and market segments, restricting its ability to expand into new markets, increasing its medical and administrative costs by, among other things, requiring a minimum benefit ratio, lowering its Medicare payment rates and increasing its expenses associated with a non-deductible federal premium tax and other assessments; financial position, including its ability to maintain the value of its goodwill; and cash flows.”

So, which messages represent the true feelings of the health insurance company executives about the Affordable Care Act? And why was it so hard to get the big carriers to provide executives who could talk about their currrent views about the act?

“There’s a definitely a lot to be pleased about,” said Dan Mendelson, president of Avalere Health L.L.C., Washington, a health data firm. “There are a lot of opportunities.”

Paul Keckley, executive director at the Deloitte Center for Health Care Solutions, Washington, spends his days with health plan executives who view complying with the Affordable Care Act as a business imperative.

“I don’t think anyone is in sackcloth and ashes,” Keckley said. “I think there’s a sense of guarded optimism.”

But Mendelson sees reasons for anxiety, and Sam Fleet, president of AmWINS Group Benefits, Warwick, R.I., sees reasons for the insurance industry to be scared to death.

“There’s so much uncertainty around it,” Fleet said. “No one knows what to do.”


President Obama signed the bill at the heart of the Affordable Care Act package — the Patient Protection and Affordable Care Act (PPACA) – into law March 23, 2010.

The Affordable Care Act is supposed to use easier Medicaid eligibility rules and a new health insurance purchase subsidy tax credit system to expand access to coverage for low-income people and people with health problems. It could bring U.S. health insurers 32 million new enrollees, more revenue, a closer relationship with the enrollees, and a chance to accept older, sicker applicants with less fear of antiselection.

The act already has imposed many consumer protection rules, such as new claim denial appeal and review standards, and a minimum medical loss ratio (MLR) rule that requires carriers to spend 85% of large group revenue and 80% of individual and small group revenue on health care and quality improvement efforts.

In 2014, carriers are supposed begin paying an industry wide total of $8 billion in new federal taxes.

A new health insurance exchange distribution system is supposed to help individuals and small groups buy standardized, subsidized coverage.

PPACA will require carriers to sell coverage on a guaranteed-issue, community-rated basis, with only a limited ability to incorporate the age of an insured in premiums.

To keep individuals from waiting until they know they have cancer or kidney failure to start paying premiums, the act will require most uninsured individuals with incomes over a certain level to buy health coverage, and employers with more than 50 full-time employees to offer coverage.

The base penalty will start at $95 per individual or employee in 2014 and top out at $695 in 2016.

If the U.S. Supreme Court decides to kill the coverage ownership mandate and leave the rest of the Affordable Care Act intact, health insurers might have to continue to comply with all of the new benefits requirements and underwriting restrictions without the protection against adverse selection that the individual ownership mandate might provide.

But “I don’t see any plan operating under the assumption that it’s going away,” Keckley said.

Health insurance agents and brokers say the MLR rule is already pushing carriers to slash producer commissions.

John Goodman, president of the National Center for Policy Analysis, Dallas, predicted at a recent House Education and the Workforce hearing that implementing Affordable Care Act requirements as written will give carriers big new incentives to enroll only healthier insureds.

Michel Brewer, president of the benefits group at Lockton Inc., Kansas City, Mo., testified at the same hearing that cost of coverage will be high enough and the penalties for failing to offer group coverage low enough that 44% of Lockton clients might save money by shutting down their group health plans and sending workers to buy coverage through the exchanges.

And other critics say many of the complaints about the act are due to a lack of clear, direct provisions in the act that are aimed at lowering the underlying cost of health care, as opposed to the cost of health insurance coverage.

Health care now devours about 17% of U.S. gross domestic product, federal health care spending amounted to 54% of 2009 federal revenue, and the cost of care accounts for more than 80% of privately insured U.S. residents’ health care spending.

The Affordable Care Act “is expanding coverage,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans (AHIP), Washington. “It’s bringing more people to the health care system.”

But the act seems unlikely to lower health care costs, and it is imperative that the country take steps to do so, Zirkelbach said.Otherwise, he said, “our system is not sustainable.”


Health insurers could have an easier time making the Affordable Care Act work if they could fine-tune it.

The U.S. Department of Health Human Services (HHS), which has taken the lead in implementing much of the act, has been doing a good job of seeking and using comments from the public, Keckley said.

But Democrats in Congress pillory health insurers regularly, and even HHS Secretary Kathleen Sebelius has made a point of singling health insurers out for a blame.

In February 2010, for example, Sebelius complained that U.S. health insurers had reported a total of $12 billion in 2009 profits without bothering to mention that U.S. hospitals had also generated about $12 billion in 2009 profits.

Some Republicans show signs of a willingness to help health insurers and others address what they believe to be shortcomings in the act. Sen. Scott Brown, R-Mass., for example, has joined with Democrats to support a bill that could give states more flexibility in implementing the act.

But, in most cases, “it’s not in [Republicans'] interest to fix this bill,” Fleet said.

Fleet cited the health insurance exchange system as an example of an Affordable Care Act creation that could use fixing.

Current rules may make antiselection pressures so great that private carriers will inevitably give way to a government-run, “single payer” alternative, Fleet said.

“There are no cost controls, just insurance controls,” he said. “The Democrats set the insurance industry up for failure.”

The Affordable Care Act does actually contain provisions – now little mentioned outside health quality community – for measuring the quality of care, measuring care outcomes, and generally promoting higher quality, more cost-effective care.

Keckley said he thinks that those provisions will soon get more attention, and that the quality provisions may prove be the most important provisions in the act.

“That’s really the tough part of this,” Keckley said. “That’s where it gets very complicated.”

Some of the quality provisions promote use of alternative payment strategies, such as “medical homes” and “accountable care organizations,” for getting patients’ personal physicians, networks of providers, or both to take responsibility for coordinating care and holding down the cost.

Some providers tried to attack the health care cost dragon back in the 1990s, but they couldn’t manage it very well, Fleet said.

Agents and brokers may make better health cost dragonslayers – if someone, somewhere, enables them to earn enough fees or commissions to stay in business – because they have an obvious incentive to prove their worth by helping customers control health insurance bills, Fleet said.

Commission-based producers and fee-based benefits consultants could, and already do, cut costs by promoting more use of wellness programs, tinkering with plan designs, and paying close attention to patients’ bills, Fleet said.

In the next few years, producers may find whether they will play a major role in controlling costs, escalating costs will force Congress to assemble a Health Reform II package – or lawmakers will simply avert their eyes from an increasingly dysfunctional market, because the poisonous atmosphere in Congress makes the idea of doing anything more helpful unthinkable.


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