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The End of Insurance Companies? Nope.

Posted by John McDonough  February 26, 2012 08:25 PM

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It is well known that the U.S. insurance industry opposed passage of the Affordable Care Act (ACA/ObamaCare). Indeed, more than $86 million of the $120 million spent by the U.S. Chamber of Commerce to oppose the law came directly from the coffers of the nation's leading health insurers. So it is fascinating to read an account of recent comments of Mark Bertolini, Aetna's CEO and President, delivered at a health industry conference this past week:

"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."

Moreover, he discounted the prospect that the results of the 2012 presidential election or a Supreme Court decision striking down aspects of the ACA would deter the change. "Reform is not going to stop. It won't go away."

So what will the health insurers look like in the future? Bertolini offered a strong endorsement of the accountable health organization model, positioning health insurers as uniquely suited to usher in an era of coordinated care. "We need to move the system from underwriting risk to managing populations," he said. "We want to have a different relationship with the providers, physicians and the hospitals we do business with."

If implemented as passed, the ACA will mean the end of individual health insurance as it has been known in most parts of the U.S. Medical underwriting, the practice by which health insurers rate and cover you based on their assessment of your medical history and risk, will be a thing of the past, as it is in every other advanced nation.

In a few states, including Massachusetts, New York, New Jersey, and Vermont, banning medical underwriting and pre-existing condition exclusions was done back in the 1990s. In these states, reform did not mean the "end of insurance companies." In Massachusetts, our insurance companies are doing fine, even though they spend close to 90 cents of every premium dollar on pure medical costs (the ACA's "medical loss ratio" requires companies to spend at least 80 or 85 cents of every premiums dollar on medical costs).

I find it encouraging that a leading voice in the U.S. insurance industry is working hard to get ready to survive and thrive in the new health insurance world coming in 2014. I know this will anger folks on the left who want to see insurance companies disappear and folks on the right who despise anyone's indication of support for the ACA.

Just as many Americans voice disapproval of the individual mandate, they also voice strong support for eliminating pre-existing condition exclusions and medical underwriting -- failing to understand how these two reforms are inextricably linked.

The industry's leading trade organization, America's Health Insurance Plans (AHIP) filed an amicus brief on the upcoming U.S. Supreme Court's arguments on the ACA. The AHIP brief neither supports nor opposes the anti-ACA suit, though argues that eliminating medical underwriting requires an effective individual coverage requirement/mandate.

Perhaps the health reform landscape is getting ready for another significant shift.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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About the author

John E. McDonough is a professor of practice at the Harvard School of Public Health. He is the author of the book “Inside National Health Reform”, published in 2011 by More »

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