Obama's False Friends of Health Reform

I'm hoping President Obama
realizes that some of the folks who've been currying favor with him are
not, as they claim, bringing "solutions" to the health care reform
table. Most Americans -- especially those who voted for him -- want
nothing to do with the kind of "reforms" they are peddling.

If you watched the president's televised Q&A on ABC last
Wednesday night, you probably noticed that one of the people in the
audience was Ron Williams, the chairman and CEO of Aetna, Inc.,
the nation's third largest health insurer, and currently one of the
most profitable. But there are a few things that you should know about
Williams.

Back in the '90s, Aetna set out on an acquisition binge in its quest
to become the biggest health insurer in the country. It got there by
the end of the decade after spending billion of dollars for several
competitors. By 1999 it had 21 million health plan members, the most
any insurer had ever had at the time.

But, as often happens after buying sprees, Aetna soon came down with
a bad case of buyers' remorse. As it turned out, some of the customers
it had paid top price for were not as profitable as Wall Street
analysts and the big institutional investors who owned most of Aetna's
stock expected. When they took a closer look at what Aetna had bought,
investors started deserting the company in droves. As a result, the
company found its stock price in a free fall.

As the Wall Street Journal
reported on August 13, 2004, Aetna's pretax profits as a percentage of
revenues began falling dramatically after peaking at about 12 percent
in 1998. By 2001 the company was a basket case as far as Wall Street
was concerned. It had to do something, and fast.

Probably the most important thing it did to turn itself around was recruit Williams from rival WellPoint, the ambitious for-profit company that was gobbling up Blue Cross and Blue Shield plans from coast to coast.

As the Journal reported, Williams promptly ordered a $20 million revamp of Aetna's data systems. Health care analyst Joshua Raskin told the Journal
that the new system that emerged from that investment, which Aetna
dubbed the Executive Management Information System (EMIS for short),
was "the single largest driver of the Aetna turnaround." Why? Because
it helped Aetna "identify and dump unprofitable corporate accounts."
How did it do the dumping? By jacking up premiums to unaffordable
levels.

By the time the dumping -- or purging, as it is frequently called in
the industry -- was done, Aetna had shed eight million of its 21
million members. It shrank so much that by the time it emerged from the
Ron Williams-led turnaround, it had fewer members than when the company
started out on its multi-billion dollar buying binge.

While Aetna was shedding those eight million men, women and
children, by the way, it also reportedly shed 15,000 of its employees.
Wall Street likes it when insurers dump employees, too, because the
workers who don't get the ax have to assume the responsibilities of
their laid-off colleagues. That theoretically boosts productivity,
which Wall Street likes. And reducing the payroll leaves more money for
profits.

The health insurance industry and its allies are working hard right
now to convince you that the creation of a public insurance option
would put a government bureaucrat between you and your doctor. As the
2004 Wall Street Journal article makes it clear, however, EMIS was at its heart a system that put corporate bureaucrats between people and their doctors. Here's what it saId:

Mr. Williams says EMIS helps him ferret out creeping
costs so Aetna can react quickly. Sitting in his first-floor office in
Hartford overlooking the Aetna parking lot, he taps on his keyboard to
see whether some of the health insurer's members are visiting emergency
rooms too much for nonemergency reasons, such as for the flu or a
sprained ankle.

Did that send a chill up your spine like it did mine? And know this,
if Aetna's CEO can keep an eye on your trips to the doctor, so can the
CEOs of all the other big insurers.

The insurance industry claims that this time it really and truly
supports legislation to reduce the number of people without insurance,
that they've changed so much since 1994 -- when they said the same
thing but did everything they could behind the scenes to kill reform --
that you can and should believe them now.

The next time you hear someone from the industry talking about how
much they are committed to reform, remember that just a few years ago,
the CEO of one of the biggest health insurers was the mastermind behind
a business strategy that cost thousands of workers their jobs and
millions of other people their insurance coverage. That's the real
"solution" the industry is bringing to the table -- and the kind of
reform Wall Street can really get behind.

Ron Williams has been richly rewarded by Aetna's board of directors
for leading the company back to a level of profitability suitable to
Wall Street. They tapped him to succeed Jack Rowe as CEO when Rowe
retired in 2006. And they rewarded him with compensation totaling
nearly $65 million over the past two years.

 1  |  2