By Wendell Potter on July 01, 2009

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.

(Rowe, by the way, was paid $22.2 million in 2005, his last full year as CEO. He played a big role in hawking the high-deductible plans that Aetna and the other big insurers are now trying to push us all into. He claimed that Americans enrolled in managed care plans have been too sheltered from the real costs of health care and that we need to have more "skin in the game," by which he meant that we should have to pay a lot more out of our own pockets when we go to the doctor and pick up our prescriptions, even if we have health insurance. The median family income in the United States is just $50,000, which means that most of us already have a lot more skin in the game than Dr. Rowe and Ron Williams will ever need to.)

The insurance industry's two biggest lobbying groups -- America's Health Insurance Plans (AHIP) and the Blue Cross and Blue Shield Association of America -- warned members of Congress in a joint letter a few days ago that the creation of a public insurance option would unravel the country's employer-based system.

As they say where I come from, that dog won't hunt.

It is the insurance company executives -- in their never-ending quest to meet Wall Street's profit expectations -- who are doing the unraveling by purging employers whose workers have the audacity to file claims when they get sick or injured.

A final point about Ron Williams: Not only are he and his fellow CEOs trying to kill the idea of a public health insurance option -- a central part of candidate Obama's health care proposal -- but he is the leading advocate of an idea Obama rejected and which differentiated his proposal from Hillary Clinton's -- the imposition on all of us of an "individual mandate." Many insurance executives were wary of such a mandate because they don't like the government mandating anything, especially those pesky state mandates that force them to include certain benefits in the policies they sell. Advocates of an individual mandate eventually brought the skeptics, including many of AHIP's board members, around to their way thinking by persuading them that insurers could make billions more in profits if every American had to buy an insurance policy from them. Now you know the real reason behind AHIP's shift from neutrality on the issue to full-fledged support. It's all about the money.


Wendell Potter is the Senior Fellow on Health Care for the Center for Media and Democracy in Madison, Wisconsin.

Wendell Potter

Wendell Potter is CMD's honorary Senior Fellow on Health Care (since May 2009). He writes a regular column for the Center for Public Integrity.

Comments

Wow.

"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."
-You fail to mention the men, women, and children quite likely got coverage elsewhere. You also fail to mention the 15,000 employees shed probably didn't retire. They got a job somewhere else(and health coverage). Who would have thought?
-Regarding Wall Street, you fail to mention that investors generally applaud ANY layoffs assuming the business is going in the right direction. Investors want the workers of a solar panel company to be more productive. I don't see how this is any different.
"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"
-Is it wrong for the head of a life insurance company to sit tapping his keyboard hoping that 80% of his policy holders don't die? This is how insurance works. See link, http://en.wikipedia.org/wiki/Insurance .

What is wrong with a CEO getting paid millions of dollars? This person is the face of a company representing thousands of employees. Should he not be compensated for leading a company to generate billions in profits? Should the CEO of Caterpiller or Disney not be compensated for their work?

Just think of how many health insurance workers will be laid off if we go to socialized medicine. 15,000 workers will seem like nothing.

God Bless the USA

I am never quite sure why heaping praise on predators and predatory behavior by industry types comes accompanied by the sign off: "God Bless the USA" . Should the majority of patients/citizens who are being fleeced by this industry (and likewise the credit card industry) feel ourselves unpatriotic? What should WE invoke? "God Bless The Sheep", "Long Live Mutton"?

And the loss of health insurance jobs may mean they will shift to productive employment in industries that are lean and where the profits come from value provided not "gotcha".

Most of us know we are being ripped off by now: the ones who deny it profit from it or are paid to ignore the glaring truth.
PJR MD

I could not agree with you more about God Bless America which is abused with politicians alike. Just what does it mean? Never could figure that out. Personally if you think what is happening to American is a God blessing us. I would beg to disagree. I too am not a sheep and fall for the stupid saying. Maybe if we created a heaven on earth then Jesus would appear. So far the ideas we have expound had not worked.

As a victim of the health insurance industry and a proponent of universal, single-payer, tax-supported Medicare For All, at least I have the guts to sign my name when I comment on a blog post.

Everyone who loves this country enough to want to improve it can join us in Washington D.C. on July 30 for the Single-Payer Rally and Lobby Day in celebration of the 44th birthday of Medicare. Details at www.healthcare-now.org.

We are not talking tractors. Next time you have a heart attack, go shopping for an emergency room the same way you would a tractor. Please! When you have a loved one or even yourself purged from an insurance carrier or denied a life saving or pain relieving proceedure, Im sure you will be singing praises to the corporation that just made you a statistic.
A universal non profit insurance pool will eliminate at least two unnecessary cost of health insurance, Share holder profits and excessive executive compensation.

You gotta wonder three things:

- Who does "Anonymous" work for? (I have a hard time believing ANYBODY who doesn't have the integrity to attach their name to a comment.)

- Where is the EVIDENCE that the 15,000 people laid off got another equal paying job and health insurance?

- I have been on Medicare/TFL for several years, have had over $130,000 in REAL CLAIMS, and NO ONE has mentioned that I am a problem. Which for profit insurance company would have kept me on?

The vast majority of the American public, approaching 90% in polls, WANTS a public option. And, there is a good reason. The crooks (literally) in the health insurance business will do anything to keep their unconscionable profits and benefits. If you don't believe that, watch Bill Moyers. The MSM are afraid to tell the truth.

I hope their days are numbered . . . .

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I applaud that finally an insider has come out. Such must have been the courage of the German soldiers to end Hilter's rule at Valkyrie . We are facing the kind of tyranny from Corporate for profit Insurance companies as the Germans faced. Then again we see the black shirts spouting the party line, lying to the people, using fear, propaganda and misinformation to spread their hold on America's future.

I have faith in the American people and the power of social networks to rip the veil away and see the tyranny behind these greedy corporate captains We will rise up as a people against the tyranny.It is not just the Iranian people who live under a theocracy but also the american worker under the theocracy of corporate power.

And this must end.

"Is it wrong for the head of a life insurance company to sit tapping his keyboard hoping that 80% of his policy holders don't die? This is how insurance works."

Which is precisely why insurance should have never got into medicine to begin with. As I say in my own article in the Johnsonville Press, on the broader topic of "Fatherly Governance":

"Health care has no business being a business. Health care is an almost exclusively local emergency and preventative service. To require that it meet business objectives is both absurd and cruel. Yet that is precisely what health insurance has done."

My alternative, as my subject line suggests, is Municipal Medical Departments or MMDs. These would operate alongside the fire and police departments, providing service directly (call it the "no payer" or "direct provision" model) to all comers. Instead of being primarily concerned with cost-cutting, the MMDs would be concerned with healing the sick and injured. Nonetheless, because MMDs will also not be concerned about profits and retaining executives producing those profits, they will be providing medical service at a significantly reduced cost.

The doctors will be on the staff, at hospitals, clinics and for house calls, relieved of the burden of billing, claims and the threat of litigation from so-called "malpractice" suits. Their education will be provided through expanded state medical colleges (with the role of the police and fire academies) and internships at the hospitals. Cost savings in paying for doctors will thus be immense with MMDs. The beneficiary of that will be the taxpayer, since the establishment of the MMDs will have shifted the cost of medical care from the patient to the local and state governments.

A company with sound governance must adhere to a code of ethics! A good company faces ethical dilemma when confronted by tough decisions such as what is in the best interest of shareholders and what is best for the wellbeing of its stakeholders! There is a huge difference between the two. Companies that take into consideration the best interest of both shareholders and stakeholders do not necessarily need to lay off employees and lay the burden on those it spares! Companies that have the capital and the power to slash jobs and reward CEOs with big bonuses need to look at their own weaknesses in being incompetent by not being able to innovate and create value for their shareholders and not by being indifferent to those employees who gave all they could to their companies by working hard and investing time and energy in keeping their companies profitable. Moreover, companies do well when their employees do well. CEOs' compensation should be based on how well a company does by promoting its goods and services to its customers who make the largest and the most important component of its stakeholders, including its employees. Now that's ethics at work! Outside a sound corporate governance and solid ethical conduct, GREED becomes King and ruthless PROFITEERS rule by DECREE!

Dear God Bless,

Who are you trying to kid. First you use the "Rovian" tactic of giving a name that makes any detractor seem unpatriotic. I am a taxpayer, voter, veteran, husband and father of two grown children. America is by the people and for the people. Not for the corporation and against the people. When healthcare is a service and not a business then you will see true changes in the health of the American people. You obviously need a good dose of getting screwed by the system and to spend a little time in fear that you will lose all you have worked for all your life because of a medical condition that threatens your well being and your livelihood. The insurance companies filled a necessary slot in the history of our civilization but have gone awry. The time for them to go is now. All of those good employees you are so worried about (ha) can be put to good use in the area of medical communications and to provide better healthcare rather than working in the healthcare denial system. I am sure they would feel better about going to work each day and maybe work harder for their clients knowing that they are contributing to the well being of their fellow travelers rather than just pushing paper unitl Friday comes. You are obviously insulated from the realities that most of us face every day. Either that or you just dont care. Your time is done, buddy. Give it a rest. You are either a fool or a tool. Not believing there is a better way or putting dollars before people. The earth is no longer flat and you are no longer relevant.

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