Health Affairs, 23, no. 6 (2004): 9-10 doi: 10.1377/hlthaff.23.6.9 © 2004 by Project HOPE	New Online   New Issue: China & India   Obesity In China   Pay Cuts For Medicare Docs   Access To Care Woes

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From the Editor

The Challenges Facing Private Health Insurance

Despite the reduction in covered lives and the public’s antipathy toward the industry, the resilience of those health insurance firms that have survived (and more than a few, including such household names as John Hancock, Metropolitan Life, Prudential, and Travelers, have mostly gotten out of this line of coverage) is impressive. Take, for example, the case of Aetna. When Health Affairs last devoted an issue to the future of private insurance (Nov/Dec 1999), Aetna was in the early stages of a near-death experience. Now, under the leadership of its current chief executive officer, John W. Rowe, Aetna has recast itself as a smaller company that places a distinct focus on profitability, with implications that are "less unambiguously positive for the health system as a whole, however," as James Robinson recently wrote (Mar/Apr 2004). The strong standing of many Blue Cross and Blue Shield plans is another example of staying power, albeit by accident in some cases. Most plans were slow to fully embrace the most stringent controls of managed care, but as their more hard-nosed competitors faced the brunt of the backlash, many Blues plans emerged with larger shares of their respective markets. Today Blues plans insure 91 million Americans, compared with 65.2 million in 1994, and their brand enjoys a new dominance.

Another challenge to the largest private insurers that has received far less attention is a pending class-action suit filed on behalf of the nation’s physicians in the U.S. District Court in Miami. The suit accuses Aetna, Anthem, CIGNA, Coventry Health Care, Health Net, Humana, Prudential, UnitedHealthcare, UnitedHealth Group, and WellPoint Health Networks of employing business practices that were unfair to physicians. Specifically, the suit alleges that between 1990 and 2002, these companies were engaged in a conspiracy to improperly deny, delay, and/or reduce payment to physicians by engaging in several types of improper conduct. The suit seeks billions in monetary damages. Aetna and CIGNA have already settled out of court, paying damages of more than $1 billion.

Enactment of the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 poses a particular dilemma for private insurers, which must decide whether to contract with Medicare to enroll its beneficiaries. The congressional Republican champions of private health plans fully expect the insurers to play in this new game of chance. To entice them, Congress authorized larger payments to plans that the Medicare Payment Advisory Commission (MedPAC) recently estimated to be 107 percent of the average cost of covering beneficiaries under fee-for-service care. While some members of Congress are expressing concern over these larger payments, private insurers are reluctant to participate for fear that the payments will be reduced after health plans have agreed to contract with Medicare. Vividly recalling the payment reductions to health plans that followed enactment of the Balanced Budget Act (BBA) of 1997, there is an industrywide perception that a similar scenario could well occur again, given the large federal budget deficit. As a consequence, health plans are moving very cautiously as they calculate whether the risk of becoming a Medicare contractor is worth the potential reward.

In this issue of Health Affairs we are again focusing on the future of the private health insurance industry. As it did for our 1999 issue on the same subject, the California HealthCare Foundation provided the necessary support to make this publication possible. The foundation’s Health Insurance Program, under the leadership of chief executive officer Mark Smith and program director Jill Yegian, supports research intended to build better understanding of uninsured populations and insurance markets, with a particular emphasis on California. We also acknowledge the contribution of Jamie Robinson, a contributing editor of Health Affairs, who not only authored the lead paper but served as our editorial adviser on this thematic issue.

John K. Iglehart, Founding Editor

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