WALNUT CREEK, Calif.–(BUSINESS WIRE)–Aetna (NYSE: AET) is now offering individual health insurance plans to Costco members in California. The Costco Personal Health Insurance program, of which there are five plans to choose from, offers broad major medical benefits; dental options; an extensive network of doctors and hospitals; and a variety of helpful services, tools and information, tailored to meet the needs of Costco members.
In addition to California, the Costco Personal Health Insurance program is also available to Costco members in Arizona; Connecticut; Georgia; Illinois; Michigan; Nevada; Pennsylvania; Texas; and Virginia. Aetna plans to expand the program to other markets in the coming months.
Aetna CEO Mark Bertolini reveals to Sarah Kliff of The Washington Post’s Wonkblog that a strategic review Aetna undertook in 2005 showed the individual health insurance market segment failing and the small group segment in decline. Market failure can be a strong motivator to act — and will remain a mortal threat notwithstanding how the U.S. Supreme Court opines this week on the constitutionality of the Patient Protection and Affordable Care Act.
Some excerpts from Kliff’s post:
“We saw an individual market in inexorable decline and, on the small group side, fewer were offering benefits and costs were rising. We knew we had to change something,” Bertolini said.
Aetna has a strong business reason to create a cheaper insurance product: Namely, getting more people to buy it. That motivation stays in place regardless of what happens with the Supreme Court this month.
“We’re really working right now on the underlying cost of health care,” he says. “These investments we’re making are about finding a different way to make models work. We’re committed to fixing that, and feel like we need to fix that.”
In 2011, some health insurers were conceding the individual market was failing, entering the dreaded death spiral of adverse selection. But none went as far as Aetna CEO, Chairman and President Mark Bertolini at a Las Vegas conference this week in proclaiming the business model of health insurance broken and facing extinction.
“The system doesn’t work, it’s broke today” Bertolini was quoted as saying by HealthData Management in remarks to attendees of the HIMSS12 conference. “The end of insurance companies, the way we’ve run the business in the past, is here.”
A fundamental function of any form of insurance is underwriting the selection and rating of risks. With medical underwriting ending January 1, 2014 under the Patient Protection and Affordable Care Act (PPACA), it’s no wonder Bertolini sees the end of health insurance as we have known it.
The PPACA as well as other factors are forcing health insurers to reinvent themselves. But as what? Since Accountable Care Organizations (ACOs) being created by the reform law are risk sharing mechanisms that reward better patient outcomes and reduced treatment costs though more coordinated, more holistic patient care, Bertolini sees a role for insurers to help manage that risk. “We need to move the system from underwriting risk to managing populations,” Bertolini was quoted as saying. “We want to have a different relationship with the providers, physicians and the hospitals we do business with.”
What about state health benefit exchanges created by the PPACA that open for business in 2014? The exchanges are to serve as purchasing pools to help individuals and small businesses aggregate purchasing power to get better deals on health insurance than they would otherwise get negotiating on their own behalf. If health insurance is becoming a thing of the past as Bertolini predicts, what will they be buying? Bertolini foresees all-inclusive, branded “health systems” (perhaps similar to California-based Kaiser Permanente) that leverage health information technologies to put patients in charge of their health.