Ronald Williams became president of Aetna Inc. in 2002, and CEO and chairman four years later. At the time he joined, the company had $2 billion in annual revenue. When he stepped down in 2011, Aetna’s revenues had grown to $34 billion. During heated debates over health reform in 2008 and 2009, Williams was a fixture at congressional hearings where he often served as the voice of the health insurance industry. He is now chairman and CEO of consulting firm RW2 Enterprises, LLC, and is active in private equity as well as a director on corporate, public sector and non-profit boards.
AIS Health: You were a witness at a number of congressional hearings during the health reform debate. Looking back, what are your thoughts on the Affordable Care Act (ACA)?
Williams: One of the things I learned is that politics trumps policy. As a result, we ended up with legislation that includes incompatible solutions. Sometimes solutions are very popular with consumers, or a segment of the population, but that might not create a sustainable financing of the health care system. For example, the 3:1 age-rating [band] is really good for individuals who are older because their premiums can only be three times as high as the lowest rate. Unfortunately, the younger people wind up subsidizing those premiums to a greater extent than they would with a 5:1 ratio. The young person then has very little incentive to buy insurance because of the cost. And given the nature of some of the benefit designs, they don’t see much value [in health insurance]. I spent a lot of time explaining that this was not a sustainable model over time because it would not incent young people to enroll.
AIS Health: Young and healthy people often don’t see much value in health insurance, particularly if they have to pay for everything out of pocket until they meet a large deductible. How can you demonstrate value to young people and get them to join the risk pool?
Williams: It’s an essential question. Without their presence, the risk pool isn’t sustainable. One of the answers is to provide more flexibility in benefit design. In a one-size-fits-all approach, we ended up with plan designs that are very comprehensive and therefore cost a lot. As a result, it was necessary to increase the deductibles. If you are young and healthy and paying your own premium with no subsidy, and you have a $6,000 deductible, that doesn’t represent a good trade. What we need are different types of insurance, some of which have copays, some that have coinsurance, but they need to offer a better first layer of coverage.
AIS Health: Do you think the ACA should be replaced, or can it be improved and strengthened?
Williams: I try to avoid the semantics of repeal and replace because I think at the end of the day, it’s impossible to completely eliminate what’s been put in place. Clearly there need to be changes to make the program more effective. The ACA’s principal success was Medicaid expansion, which brought in about 15 million newly insured. We have to figure out how to structure the program in a way that we can honor the commitments that have been made by the ACA.
AIS Health: A lot of health plans pulled out of the public insurance exchanges after losing significant amounts of money. What can the Trump administration do to keep carriers competing on the exchanges in 2018 and maybe attract new ones?
Williams: My view is the exchanges are an unnecessary intermediary and another layer of quasi-regulation. I would point to Medicare Advantage (MA) as a wonderful example of where individuals can obtain a defined, regulated standard benefit by going directly to a health plan without entering any intermediary. Right now, if you want your [premium] subsidy, you have to go through an exchange. It’s like saying you can only get your tax refund if you go to this particular tax preparer. I don’t think the exchanges are a fundamental part of health care in the future.
AIS Health: Gaming the system has been a significant issue for the exchanges and carriers. CMS has tried to fix that, but it seems it’s been too little, too late.
Williams: State insurance regulators understood historically that insurance had two dimensions. There is a consumer dimension of treating consumers fairly and ensuring they had access to coverage. But they also had a financial solvency component. And if you gave consumers everything they wanted, some people would try to game the system because that is in their self-interest. States understood that. When we shifted to more federal regulation, we took the balance much more in the direction of abandoning the financial solvency concern. But insurance requires capital and the ability to balance these competing interests.
AIS Health: Aetna was a pioneer in consumer- directed care when you were CEO. There’s a renewed focus on health savings accounts (HSAs) and consumerism with the new administration. What are your thoughts on that?
Williams: I think it’s a real positive. Giving people the ability to set aside resources to pay for [their health care] is extremely important. That said, it is not the answer to health care cost escalation. I think the answer is really to create more alternative payment mechanisms like a capitated model, where the physician and the delivery system are given the resources and quality metrics they need, and the ability to spend those resources in ways that improve the health status of the population. Someone with a chronic health condition might need a ride to the doctor’s office, for example. But there is no code for getting an Uber. If you capitate the delivery system, that patient could use an Uber or whatever makes sense to make sure they can get the care they need. I think HSAs are an important part of the solution, but there is no one silver bullet.
AIS Health: You recently gave a presentation for the board of an integrated hospital system. What do they hope to see going forward?
Williams: They’re trying to figure out how they change the nature of their relationship with their physicians, who have historically been the admitters to their hospitals. How do they develop true integrated delivery systems that move them from a fee-for-service, activity-based system to a value-based system that gives them the ability to receive alternative payment — typically in the form of global capitation? They really want to understand the skills and competencies that need to be developed that they don’t already have. And they also want to know how to partner with health plans in this regard.
AIS Health: We’ve been moving away from a fee-for-service system, but can we get there? Do you envision a time where we’ve done away with fee-for-service?
Williams: I believe that we will. I think a lot of the work that [CMS] has been doing has been focused on that direction. But more importantly, the commercially insured sector, the Medicare Advantage (MA) sector, all will move us in that direction. Health care is an interesting space. It’s a space where sometimes months of change happen over decades, and sometimes decades of change happen in months. I think with capitation, we are about to enter a period of much more rapid acceptance and diffusion as the data, the analytics give us the ability to make certain that we’re not just capitating providers and health systems, but making certain that the right quality of care is being delivered to patients as well.
AIS Health: As the new Congress and administration look to reform the health care system again, what role will insurance carriers play? Will they have a seat at the table?
Williams: They should have a seat at the table. Along with consumers, and physicians and other important constituencies. Insurers can provide a fact-based analysis, different alternatives and their [likely] outcomes. They can explain the potential impact of different policy options, and help policy makers develop a more sustainable set of solutions. Ultimately, the policy makers have to decide, but the insurers can play a key role in building a more sustainable system.
AIS Health: During the debate over health reform eight years ago, health insurers were sometimes demonized by advocacy groups and lawmakers. Has the perception changed since the enactment of the ACA?
Williams: There was a lot of demagoguery and propaganda techniques used in passing the ACA. I gave a talk to the Aetna workforce the day that the Speaker of the House [Nancy Pelosi (D-Calif.)] basically said that the insurance industry was immoral. The 30,000 Aetna employees who came to work every day — doing their very best to deliver services to our members and facilitate their access to care — were shocked and disappointed that they were being characterized that way. I hope that the language is more thoughtful and that the leadership engages in authentic conversations with the American public that outlines the difficult choices that need to be made. Those choices should include consumers, physicians, hospitals and health plans. But there are difficult choices that have to be made. Do older people pay more? Do younger people pay more? How much do the wealthy pay? How much do the moderately compensated pay? That needs to be discussed so people understand the choices that need to be made.