Aetna Message: Use Health Care and Pay More or Receive Less

Aetna (AET) treated us to a surprise early Q2 conference call Monday morning. Medical costs on certain commercial accounts substantially exceeded expectations. Not by more admissions, but by more higher-cost events to the tune of $10K to $30K per event. COBRA medical benefits trended to between 100% and 150%*. Medicare and Medicaid startup medical loss ratios also exceeded longer term trends. All this points to an acceleration in the rate of consumers deferring medical care.

Aetna also cited suspicious medical service providers that were billing for multiple procedures for the same medical event. Aetna intends to rewrite provider agreements to eliminate payment for multiple procedures, as well as increase auditing of these providers.

First Aetna cited economic conditions for these trends, than conceded that the trends are more secular than cyclical. Therefore Aetna will be re-underwriting the employers of “abusive” employees with higher premiums and eliminating reimbursement for multiple procedures by providers Aetna deems abusive or suspicious in claims coding.

Both increasing employer premiums on commercial accounts and restricting benefits (whether abused by providers or not) points to a greater trend of medical underwriting reaching employees. Employer groups that are less healthy or dominated by chronic or high cost medical events will actually get fewer benefits as their employer premiums go up.

Continuing this trend, as employers reduce benefits for the sickest employee groups, more sick employees will defer care. This will leave a much greater population of advanced diabetic and cancer patients to Medicare and Medicaid. Therefore, it is the government’s business to regulate health insurance because the government ends up paying far more for free market deferred care.

Employees with gold-plated health insurance should beware. Without government minimum standards, Aetna is telling you your care will be rationed. If your care costs too much, one way or another your access to health services will be restricted.

Everyone (both the haves and the have nots) really does have a stake in seeing that healthcare reform becomes a reality. Unfortunately, President Obama has not done enough to scare the haves into realizing they are truly at risk.

*COBRA breeds adverse selection because medically underwritten individual policies are generally cheaper for accepted applicants.

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