News of Interest
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New Aetna Logo
By Matthew Sturdevant, The Hartford Courant Aetna has a new logo that it hopes will help redefine the insurer broadly as a health services, or "health solutions," company.
Aetna changed its logo font from a variation of Bodoni to a new custom-designed lettering. Aetna also brought back the ligature between the A and E used for 151 years until it was discontinued in 2001. The ligature is returning "as a unique symbol of our brand and our heritage — reinforcing our 160-year-history, our dedication to building relationships with our constituents, and our promise of a connected health care experience," the company said. [Sample Our Free Connecticut Business Midday Newsletter] "We want to help make health care work better for everyone," said Aetna Chairman and CEO Mark T. Bertolini. "Aetna's refreshed brand reflects our goal of combining innovative benefits products, game-changing technologies, and collaborative relationships with the provider community to create a system that is more connected, convenient and cost-effective. Aetna is uniquely positioned to deliver on this goal." The new logo was unveiled on company web sites Wednesday, and the old logo is being removed from signs at the company's Asylum Hill headquarters. But the new signs on the buildings and lawns will not be installed until late winter or early spring, spokeswoman Susan Millerick said. Aetna is marketing itself now as a company with four main categories of business — health plans and benefits; a provider of wellness programs and resources for health living; a source of financial planning for health care spending; and an expert in enhancing productivity or other business related to health care. The Hartford-based insurer announced in December 2010 its plans to spend $500 million to acquire Medicity, a health information exchange company based in Salt Lake City. In April, Aetna announced its plans to spend $600 million to buy New York-based Prodigy Health Group, which is a third-party administrator that manages self-funded health plans. In June, the company said it would buy Genworth Financial's Medicare supplement business, Continental Life Insurance Co. of Brentwood, Tenn., for $290 million. In July, Aetna said it planned to buy PayFlex Holdings, a health plan administrator, for $202 million.
[ Top of This Page ] Aetna, Cigna to the merger altar?
By Greg Bordonaro, The Hartford Business Journal Could pressures from health care reform force two of Greater Hartford's largest health insurance companies to join forces? Maybe, one analyst says. Speculation has been growing in recent weeks that Hartford health insurer Aetna and Philadelphia-based managed care provider Cigna, which has major operations in Bloomfield, could make perfect merger pals. Rumblings about a possible deal began when Cigna CEO David Cordani told analysts at an investor's conference earlier this month that a merger between Cigna and Aetna would have benefits including adding significant scale, according to Dow Jones News service. Cordani also said Cigna could generate shareholder value by remaining independent, Dow Jones reported. But then Barclays analyst Josh Raskin recently wrote a note to investors that outlined 10 reasons why a deal between the two companies makes sense, and he even provided a timeline for when it could unfold. Aetna and Cigna declined to talk about merger speculation, and it's not clear if they even have had talks yet. But if a deal were to happen it would have major implications for Connecticut. Both companies are significant employers in Greater Hartford and a merger would undoubtedly lead to consolidation of their workforces. And their combination would also give them the largest market share for health insurance coverage in the state surpassing Anthem Blue Cross and Blue Shield, which currently holds that position. In terms of Raskin's rationale for why a deal makes sense he said:
Raskin went on to say that if a deal were to get done it would need to be closed in early 2012 and both companies fully integrated by end of 2012. He said that date is significant because it is right before many of the main aspects of federal health care reform need to be implemented in 2014, including the health exchanges and individual mandate. [ Top of This Page ] Aetna Middletown: Massive Demolition And Recycling Project
By Kenneth R. Gosselin, The Hartford Courant Think you've bought into the recycling movement? Try and top this one. In Middletown, Aetna Inc. is demolishing its now vacant 1.3 million-square-foot campus and parking garage — and is expected to haul out more than 5,000 tons of steel that will be melted down and formed into new beams for new construction. Ceiling tiles weighing 444 tons were stacked on pallets, shrink-wrapped and shipped to Armstrong World Industries, where they will be ground up and recycled. And 91,000 square yards of carpeting was donated to a charity that distributes used carpets to businesses and the needy. Statistics on commercial demolition and recycling projects aren't available. But the Bloomfield company that is overseeing the demolition and recycling — in business since 1921 — is struck by the magnitude of this job. "It probably ranks as one of the largest in the state," said Steven Andrea, construction project manager for Bartlett Brainard Eacott. "It's mammoth when it's coming down right in front of you." When Aetna built the Middletown campus in 1983 at the cost of $170 million, it was hailed as the crown jewel of economic development. But 28 years later, corporations no longer need such large spaces, especially ones like the Middletown campus that was designed for one tenant. Last fall, Aetna said it would demolish the structure and seek to redevelop the property. "One of our goals was to the extent possible not have any of these materials just to go to the landfills," Fred Laberge, an Aetna spokesman, said. "It makes a lot of sense for us to do this, both as stewards of the land and as a financial decision." While the recycling is good for the environment, Laberge said it also made a lot of sense financially because Aetna would have had to pay to dump the demolition debris in a landfill. Laberge declined to name a specific cost for the demolition and recycling, but estimated that it was in the millions of dollars. In addition to the building materials, Aetna donated nearly $1 million worth of furniture and other items to nearly 400 different community organizations, Laberge said. The demolition got underway in earnest in December. By the end of this week, all that remained were towers that housed elevator shafts and stairwells. Work on the site is expected to wrap up in August, when the property is filled in and made ready for a new, as yet unknown development. The fill will also come from the site: all the concrete and granite is being crushed on site and will be spread over the area that once was described as the office park of the future.
[ Top of This Page ] Ronald A. Williams Appointed To
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Aetna has bought a number of health technology companies in the recent past. Company officials have said on several occasions they hope to diversify revenue — and the change has sparked the Hartford company's first new logo since the reaching human figure was introduced in 2001. The new Aetna logo, the company's first since 2001, contains no graphic besides the letters. Its main color will be purple, but other colors, including teal and pink, are part of the pallette.
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| Mark T. Bertolini |
| Mr. Bertolini, the Aetna president, will replace Ronald A. Williams as chief executive officer in November. |
| (Courtesy Aetna / Oct. 20, 2010) |
He would become Aetna's president nearly six years later. But the bottom of their world was about to fall out, piece by piece. Four days later, terrorists seared 9/11 into America's psyche, and the day after Thanksgiving 2001, their son, Eric, was diagnosed with a remarkably rare and deadly cancer.
Then, after an anguishing 1 1/2 years securing Eric's survival against all odds, a horrific 2004 skiing accident nearly killed Mark Bertolini. It left him partly disabled and set him on a course toward nontraditional remedies such as yoga and acupuncture for pain that will last a lifetime.
On top of all that, Bertolini, promoted to be Aetna's president last month, donated a kidney in May to save Eric, whose kidneys were failing as an indirect result of his battle with cancer. The nightmarish experiences made Mark Bertolini more intimately familiar with the nation's health care system than virtually any of his insurance industry peers are -- or would ever want to be.
Bertolini, who was a paramedic in his early 20s, feels he has gained a unique perspective from the more recent tribulations that will shape the way he leads the country's third-largest health insurer. "I might not have been ready for this job had it not been for the accident," Bertolini, 51, said in an interview. "It's changed me. It's made me a better leader, a better person."
He has already been hobnobbing with politicians to advance Aetna's vision of health care reform, which he's helping to mold. He rejects the hotly debated idea of a government-run system, but advocates a more user-friendly and safer version of the present system. After all, the family's medical misfortunes revealed some of the inadequacies of the nation's health care system. Bertolini saw communication problems among health care providers, the lack of a consistent way they can share and understand information about a patient, and opportunities for reform to improve patient safety and care.
Mark Bertolini and his wife, Susan, just back from Italy in 2001, were sipping Vernaccia di San Gimignano wine in the hot tub of their spacious Avon Mountain home and reveling in their good fortune. "It was a learning experience for my wife and me, in terms of the amount of effort that individual consumers need to put in to make sure they're getting the right information, the right medical services, and the right health coverage," Bertolini said.
Saving His Son
The journey began when Eric was 16 and diagnosed with Gamma Delta T-cell lymphoma, a type of cancer of the T-cells, which are supposed to protect the body from infection. The cancer spread to his lymph nodes and bone marrow. Only 60 people had been diagnosed with it worldwide at the time -- mainly males aged 16 to 35 -- and it was considered incurable. "It was like a lightning bolt," Mark Bertolini said. "We immediately went into survival mode as a family."
Mark Bertolini and his wife, Susan, just back from Italy in 2001, were sipping Vernaccia di San Gimignano wine in the hot tub of their spacious Avon Mountain home and reveling in their good fortune. Eric went through chemotherapy at Connecticut Children's Medical Center, and then in Boston, had an intentionally mismatched bone marrow transplant from an uncle. It was designed to create "graft vs. host disease," an immunological response that would attack the cancer. Sure enough, the disease came in, but Eric bled from his gut every day and withered to 80 pounds. He entered a hospice in July 2002 and was told he would die.
Mark Bertolini and his wife, Susan, just back from Italy in 2001, were sipping Vernaccia di San Gimignano wine in the hot tub of their spacious Avon Mountain home and reveling in their good fortune. Doctors had given up on Eric, but his parents refused to take no for an answer, recalls Jeff D. Emerson, who worked for Mark Bertolini at three health insurers including NYLCare, which Aetna acquired. Bertolini "saved Eric by his own force of will," said Emerson, who is executive vice president for the public sector division of Virginia-based ValueOptions. Bertolini, who was virtually living in his son's room at Children's Hospital Boston, armed himself with "Harrison's Principles of Internal Medicine" and says he "tortured" the medical team every morning. Even his son remembers him pushing and prodding doctors and nurses to action.
Bertolini and his wife, Susan, a nurse who no longer works in that field, found out from other physicians that a form of estrogen called Premarin might stop Eric's intestinal bleeding. They got Eric on the drug and it worked. Still, Eric was starving because he wasn't getting fats, and was unable to take a fat-based supplement intravenously because he was allergic to the soy in it. His father had a doctor locate a fish-based supplement in Austria, but because it wasn't approved by the Food and Drug Administration, Bertolini had to get an exception. Then he had to pull strings with the manufacturer's chairman to actually procure the product.
Three months later, in early 2003, Eric came home. Eric remembers his father's stoicism during the ordeal, and asking his parents at his hospice bed "Aren't you guys sad?" "They both looked at me, their red eyes, some tears coming out, and both said, 'No, we're not sad that you're living right now.' That was kind of special.'"
Eric, now 22 and studying math and physics at UConn, is considered cured of the cancer. But he lost his spleen and gall bladder along the way, had two strokes, and ended up on dialysis until the kidney transplant May 31 this year.
Despite the horrors, "I never for a moment thought we were going to lose," Mark Bertolini said. "I never for a moment thought we weren't going to make it."
Skiing Into Hell
That never-say-die personality ultimately helped Bertolini out of a very dark place after his life-changing accident Feb. 18, 2004. An expert skier, he was making his way down a slope at Killington in Vermont when he looked back to check on his daughter, Lauren, and one of his skis "caught an edge" -- caught on something unknown in the snow. He crashed into a tree, breaking his neck and tumbling 30 feet down a ravine. He'd split his shoulder blade down the middle, had a bilateral concussion, and broken five vertebrae in his neck. The nerves that supply his left arm had been ripped out of his spinal cord.
Lauren found him unconscious on the side of a cliff, a stump beneath his neck, preventing him from slipping another 30 feet down into a river. She was able to rouse him, and he was evacuated by helicopter to Dartmouth-Hitchcock Medical Center in New Hampshire. A priest gave him last rites in the intensive care unit.
He pulled through and after just a week, left the hospital to recover at home. Luckily, the neck fractures didn't dislocate and healed in place. He credits that to being "in such great shape" before the accident. Less than four weeks after the accident, he did a presentation for Aetna at an investor conference -- walking with a cane, his left arm in a brace, and his head tilted from the trauma.
Bertolini's left shoulder muscles, though, have deteriorated, and he tends to hold the arm horizontally across his mid-section, although he can still grasp light objects, open doors, and do other simple tasks with the arm. Nerve damage has left pain that he describes as feeling like he's hitting his funny bone all day long, and it's worse on humid days.
For the first year, Bertolini used a plethora of narcotics for the pain such as Oxycontin, Vicodin, and Fentanyl and still barely slept at night. He says he didn't get hooked on the drugs, insisting he's more of an "adrenaline-endorphin junkie." At his wit's end, he went looking for better treatments. The solutions include weekly cranial sacral massage, which involves the head all the way down to the tailbone, aimed at getting a flow of spinal fluid that calms the nervous system, Bertolini said. The massage got him off narcotics in four months, and he says he now takes nothing but Tylenol for the pain.
He also got acupuncture in Boston for a year and now keeps needles at home and when traveling to self-administer the treatment. Ashtanga yoga, he says, also helps him deal with pain and restore a sense of well-being he used to get from daily 5 a.m. 4-mile runs, which he can't do anymore. Each morning he practices yoga in the third-floor gym of his brick colonial, and meditates morning and evening, sometimes burning incense.
Bertolini says the whole process allows him to be "present in the moment." That means being ``completely attentive in relating to the individual or individuals or situation at hand," whether it's dealing with pain or leading employees at work, he said.
The 6-foot-1 Bertolini has trimmed back down to 185 pounds from the 240 he had reached while inactive and depressed, before discovering yoga and meditation last year. He also returned to skiing -- without poles now, because of his destroyed shoulder -- and he hikes with the family's golden retriever, aptly named Lucky. The best medicine, he says, was promptly returning to work at Aetna after the accident and feeling productive, even though he acknowledges not functioning at full speed the first year. The company, which won a federal award for workplace innovation to employ people with disabilities, adapted Bertolini's office with a computer keyboard for one-handed use and a special ergonomic chair.
Bertolini believes his experiences have made him more empathetic about disabilities but privately, less empathetic with people who complain about minor problems. "He has been through the biblical trials of Job and has come out with his sanity intact, his family intact, and he is a stronger person today because of all his personal challenges," Emerson said. Bertolini now considers himself a "huge champion of people with disabilities," and calls himself a "straight ally" of lesbian, gay, bisexual and transgender (LGBT) employees in the workplace.
The national Out & Equal Workplace Awards -- Outies -- named him one of four finalists this year in the category for non-LGBT people. Bertolini noticed the only employee resource group at Aetna without an executive sponsor was the LGBT group. He stepped up, and he started getting such e-mails as ``I didn't know you were gay!'' He playfully but pointedly countered by responding, "How do you know? We know I'm not lesbian, but how do you know I'm not bisexual or transgender?"
Working Class Childhood
Bertolini isn't shy about crusading for people with disabilities, either, but he isn't defined by his own physical limitations. Instead, people around him remark on many other attributes -- a quick mind, dark sense of humor, toughness tempered by empathy at times, a distaste for being snowed, an eye for talent, and street smarts.
He's the product of a working class childhood, first in Detroit where he was born and lived for five years, and then in the suburb of St. Clair Shores. He's one of six children of an Irish mother and an Italian father, who worked in a plant that made patterns for machines that manufacture automobiles. As a teenager, Mark earned spending money doing various jobs at the plant, such as sweeping floors and painting walls.
He entered Wayne State University in Detroit and became a "weekend warrior" at Ford Motor Co., one of the many college students hired to work Friday to Monday to fill in for absent union employees. The work -- whether pushing buttons at a giant noisy machine or installing brake shoe springs -- was repetitive and unbearable.
His mother wanted him to become a doctor, but that idea fell apart because he failed miserably at college the first time around. Bertolini says he'd been an A-student in high school with no study skills, but a photographic memory. As a result, he said, "I never really had to learn anything. All I had to do is memorize everything. ... I got to college and you actually had to knit together concepts and understand things, and it wasn't as simple as regurgitating what you saw up on the blackboard."
Bertolini was only a sophomore when he left college after more than three years, and trained as a paramedic. He became an emergency room coordinator at a St. John Hospital trauma center in Detroit. After he married in 1979, he went back to Wayne State full time and earned an accounting degree in 2 1/2 years while his wife worked as a nurse. He later got an MBA in finance from Cornell University.
People who know him envy his mental capabilities. "He's faster doing numbers in his head than I can do on my calculator," said Emerson, formerly of NYLCare, where Bertolini was an executive vice president. Bertolini impressed Jeff Bastable, who was CEO of Westerly Hospital in Rhode Island, while doing a residency for a Cornell program in health care management during the early 1980s. Bertolini's recommendations to improve the finances of emergency room operations at Westerly boosted revenue $1.7 million the following year, Bastable said. They've remained good friends. Bertolini "has an uncanny ability to process lots of information in a rapid way. I would guess this guy's IQ is off the charts," said Bastable, who is major gifts/gift planning officer for St. Joseph's Foundation in Syracuse.
Bertolini is street-smart in his ability to figure out what's really going on by "reading" what people don't say as well as what they do say, said Joseph Lynaugh, who was president and CEO of NYLCare.
New York Life Chairman and CEO Sy Sternberg thought Bertolini was a keeper, too, and chides Aetna for letting him get away the first time around. Bertolini was at NYLCare when parent company New York Life sold it to Aetna in 1998. Sternberg says he told Richard Huber, Aetna's chief executive at the time, "The person you absolutely don't want to lose is Mark Bertolini," but Huber didn't offer a senior enough position to keep him after the acquisition. So Bertolini joined CIGNA in senior posts before rejoining Aetna in early 2003.
Personality Paradox
Despite the praise, the executive isn't without critics. One former colleague describes Bertolini as "full of himself" and narcissistic. Bertolini chuckles at that, saying that as a leader, "You have to have a level of confidence about what you're doing in order to get people to follow you." He does seem to enjoy talking about himself and his family in cinematic detail. He and Aetna Chief Executive Ronald A. Williams are yin and yang; Williams is more reserved and guarded.
Bertolini's personality is something of a paradox. Sternberg calls him an extrovert, and Bertolini considers himself an introvert. He says he's fine dealing with people one on one, but claims he's shy in groups and parties and has to psych himself up to speak at events. Asked to assess his weaknesses, he says he jumps to conclusions too rapidly sometimes "because of the rapidity of my thought process." Then he has to pull back and "allow the organization to get to a place where it can act on things."
Lynaugh recalls Bertolini as having a temper and yelling, while Emerson says Bertolini has matured and "become even more contemplative, even more philosophical" after the near-tragedies in his life. Bertolini says he's not a screamer, but there are a few things that make him angry. "The lack of integrity, when people aren't telling me the truth, when people are trying to give me BS, I'll be all over that in a heartbeat because we don't have enough time for that," he said.
He's too busy trying to advance a long-term vision of Aetna as "a trusted source for people to make good decisions about their health care" because poor health can be the single biggest threat to financial security. "What we have an opportunity to do here at Aetna," Bertolini says, "is provide a level of information, a level of education, and a set of tools and products that can help people protect [their] financial security by first understanding what they can do themselves to improve or maintain their health status over time."
He also sees Aetna as an active participant in the growing debate over health care reform, and Barstable predicts Bertolini will play a role in national health policy. With such intense medical experiences under his belt, "He's not just talking," Barstable said. "He's walking the talk. He's lived it."
[ Top of This Page ]
Aetna CEO Ron Williams To Retire; Bertolini Named Replacement
By Matthew Sturdevant, The Hartford Courant
October 20, 2010
Ronald A. Williams, Aetna's chairman and chief executive officer, will retire after almost a decade with the Hartford-based health insurer, and will be replaced by longtime heir apparent Mark T. Bertolini, Aetna's president.
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| Ronald A. Williams |
| In this May 2, 2007 file photo, Aetna Inc. Chairman and CEO Ronald A. Williams poses for a photo after he appeared at the Legislative Office Building for Insurance Day at the state Capital, in Hartford, Conn. Health insurer Aetna Inc. said Wednesday, Oct. 20, 2010, Williams will retire next spring, and company President Mark T. Bertolini will take over starting next month. |
| (Bob Child / Associated Press / October 20, 2010) |
After Williams became CEO in February 2006, Aetna's revenues increased 54 percent, to $34.7 billion, from 2005 to last year and its membership increased 28 percent in that same period to 18.9 million. Williams, among the few African American CEOs running a Fortune 500 company, was named corporate executive of the year for 2006 by Black Enterprise magazine.
Williams and Bertolini, 54, generally are viewed as having steered Aetna deftly from corporate restructuring into the post health care reform era. The succession was widely expected, although Aetna had not announced a timetable. "Overall, we expect this to be an orderly management succession for Aetna," said Scott Fidel, an analyst with Deutsche Bank Securities.
Bertolini is an industry veteran who has been closely involved in managing Aetna's business operations and in helping to develop strategy, Fidel said. "My style of management will be different from Ron's; every manager is different," Bertolini wrote in an e-mail to The Courant. "However, I have been very involved in the development of the culture that has made Aetna a successful organization. Our organizational structure is something that supports how we operate our businesses. Those businesses change to meet the demands of the market, and as necessary, we adjust our structure to adapt to those needs."
The change comes as Aetna and other health insurers face uncertain times with a massive industry overhaul that got underway this year and will continue for years to come as federal health care reform takes effect.
Aetna employees packed a company auditorium, which holds about 900, for an all-employee meeting Wednesday to announce the change. Williams and Bertolini each received a standing ovation from employees.
Williams, formerly an executive with Wellpoint, became Aetna's No. 2 executive under former CEO Jack Rowe in March 2001. Williams, the lower-key personality of the two, was the main architect of Aetna's restructuring efforts, during which the company reduced unprofitable business and set the stage for growth. "After nearly 10 years at Aetna and with the company performing well, it is time to step aside," Williams said in a prepared statement. "The passage of major health care reform legislation has underscored the need for market-based solutions to address quality and affordability challenges in health care, and the next few years will present another opportunity for Aetna to lead."
Williams earned $7.6 million in compensation and stocks vested in 2009, a fraction of his $40 million take-home pay for 2007.
The company's employment overall grew under Williams' watch, although the number of Connecticut workers is down by more than 400. Aetna had 30,156 employees companywide at the end of the first quarter in 2006 when Williams became CEO and it now has 34,300 employees. The number of employees in Connecticut decreased during that time from 7,604 in March 2006 to 7,168 this month.
Asked about whether employment in Connecticut will change under his watch, Bertolini said by e-mail, "We've been part of the fabric of Hartford for 157 years. We have strongly supported the community. We anticipate that our traditionally strong relationship with the city and state will continue as long as the state maintains an attractive business climate."
Williams and Bertolini, committed to health reform, met personally with state and federal officials around the nation. Bertolini, who joined Aetna in 2003, brings personal experience to the health care debate. He nearly died in a skiing accident in 2004, and he donated a kidney to his son three years later — the year he became the Aetna president.
"I am proud to be given the opportunity to lead Aetna, a company with extraordinary strengths in brand, values and people," Bertolini said in a prepared statement. "I have had the great fortune to work alongside Ron Williams, whom I greatly admire and who made Aetna a leader in customer-driven innovation and Health Information Technology."
Aetna's shares were up 43 cents, to $31.33, Wednesday at the close of the New York Stock Exchange, an increase of 1.39 percent on a day when the Dow Jones Industrial Average rose 1.18 percent.
[ Top of This Page ]
Aetna To Demolish Middletown Complex, Redevelop Property
By Kenneth R. Gosselin, The Hartford Courant
September 9, 2010
[See images in next article]
In the 1980s, Aetna Inc.'s mammoth, $170 million campus in Middletown was praised as the corporate office park of the future. The future is here, but the 1.3 million-square-foot building won't be for much longer. Aetna said Thursday it will demolish the sprawling complex in the next six to 12 months and redevelop the 260-acre property for another use. A separate data center on the property used by Aetna will remain, the Hartford-based insurer said.
The redevelopment would be one of the largest in central Connecticut in recent years. But the project would take years to complete while the state struggles to recover from the recession. The redevelopment would probably involve dividing the property into smaller pieces, Aetna said. "Whatever the new use, it will have to be compatible with our data center," Aetna spokesman Fred Laberge said. "It is doubtful that it would be another enormous facility."
The demolition is a stunning example of how quickly a building can become outdated, even one that once accommodated nearly 5,000 employees.
In April, as Aetna completed moving employees out of the main building in Middletown, it confirmed that demolition was possible as it consolidated employees at its Hartford headquarters. The decision to demolish the structure — hailed as a crown jewel of economic development when it opened in 1983 — reflects a dramatic change in corporate needs. Large buildings are no longer desired in most cases, and the trend is toward office parks with multiple, smaller buildings. Corporations also are encouraging more employees to work from home, cutting down on the space companies need to lease or maintain.
Officials in Middletown and the surrounding region said they weren't surprised by the decision, given the challenges in reusing the building. It was built with a single occupant in mind: Aetna's employee benefits division. Its irregular design, massive atrium and "pods," would make it difficult to divide into smaller spaces. "I can totally understand Aetna taking it down," said Lawrence McHugh, president of the Middlesex County Chamber of Commerce. "To attract another user would be very difficult." Aetna said it had explored selling or leasing the existing structure, but no viable alternatives emerged, Laberge said.
The insurer was also faced with the prospect of investing millions of dollars to refurbish the space and would have to maintain and pay taxes on a building that was empty. Laberge said he couldn't estimate how much the demolition would cost or how long it would take. But it could easily run into the millions of dollars and stretch on for months.
McHugh, who was chamber president when the campus opened, said the prospect of new economic development could generate the same kind of excitement that the Aetna building did a quarter century ago. "It's a beautiful site," McHugh said. "There's a lot of opportunity there." Aetna declined to speculate on future uses for the property.
Commercial real estate brokers said Thursday that the property, off Middle Street, is in an attractive location, close to I-91. "If you look at the development off Middle Street, just to the south, there have been distribution facilities, showrooms and industrial space," said Jonathan Putnam, a commercial real estate broker at Cushman & Wakefield in Hartford. "There will be more demand for that space than [office] space." It's possible that a smaller corporate headquarters could occupy a portion of the site, Putnam said.
Middletown Mayor Sebastian Giuliano said he supports future commercial development on the site for the tax revenue it would generate. But he cautioned that the town has to consider any proposals carefully. "You can't replace something like that somewhere else in town," Giuliano said. "You don't want to panic and take the first thing that comes along, just because it's something."
When it was built, the main building was believed to be the largest ever constructed in the state, larger than Westfarms mall. It was also part of a trend by major corporations to establish sprawling campuses in the suburbs. The construction by Aetna followed a similar project in Bloomfield by CIGNA, Putnam said.
Although the exterior of the building appears the same, gutting the interior has been underway for months. There are extensive plans for recycling what's removed, including 800,000 square feet of carpeting and an equal amount of ceiling tiles, Laberge said.
Aetna's long-term lease on the space expired this summer, but under a complex legal arrangement from years ago, ownership reverted to the insurer. After Aetna completed construction in 1983, it sold the building — but not the land — to GE Capital and signed a 25-year lease for the space. The sales agreement required that GE Capital lease the land under the building from Aetna. If that lease for the land wasn't renewed at the end of the lease, the building would revert to Aetna. In July, GE Capital declined to renew the lease.
Laberge said Aetna had anticipated GE's decision for some time. Even though Aetna had leased the space, it acted as though it were the owner, paying maintenance and taxes. GE would have had to take on those expenses, make improvements, and find a new tenant.
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Aetna's Massive Middletown Building May Face A Wrecking Ball
Huge Structure Nearly Empty; Lease Almost Up
By Kenneth R. Gosselin, The Hartford Courant
April 25, 2010
 In 1983, Aetna built the massive 1.4-million-square-foot Middletown complex at a cost of $170 million to house 4500 employees. Today, the buildings sit empty with all the workers back in the Hartford headquarters. (Stephen Dunn / Hartford Courant / April 23, 2010) |
Now, just 27 years later, the 1.4-million-square-foot behemoth could be facing the end of its own life — and the wrecking ball.Aetna's 25-year lease for the building expires in July, and nearly all its workers have been emptied out. Even though it doesn't even own the building anymore, Aetna soon could be forced to decide its fate.
Under a complex legal arrangement from years ago, the ownership of the building — which Aetna built and then sold two years after its opening — could revert back to the Hartford-based health insurer.If that happens, said Aetna spokesman Fred Laberge, "Demolition is one option that is being considered."
Even the possibility of razing the building is stunning considering that just a quarter-century has passed since it was hailed as a plum of economic development, widely believed at the time to be the largest building ever constructed in the state — larger, for example, than Westfarms mall.
Aetna said that it is still negotiating with owner GE Capital and that no decisions have been made. If the complex reverts to Aetna, the realities are blunt: The building needs tens of millions of dollars in improvements, and the 260 acres off Middle Street in the city's west end could be more valuable without the building, more easily divided and sold off in pieces.
The sprawling complex also was built with one occupant in mind: Aetna's employee benefits division. Its irregular design, massive atrium and "pods" would make it difficult to divide into smaller spaces. "There is no longer need, in many cases, for these massive structures," said John R. Mullin, dean of the graduate school at the University of Massachusetts and director of the school's center of economic development. "Construction is now tending to the smaller, and the creation of office parks where you have multiple buildings."
Mullin said recent trends also show large corporations spreading operations over multiple geographic regions across the country and the world. And in New England, he said, the big companies that are potential tenants have, for the most part, become much smaller. "It may mean that knocking it down makes great sense," Mullin said.
A Crown Jewel
In the 1980s, the Middletown campus was a crown jewel for Aetna and for the state, praised for its modern design. A majority of employees welcomed the change from older offices in Hartford — a move that was, at the time, hailed as the largest corporate relocation in U.S. history.At its height in the mid-1990s, the campus housed 5,000 workers. When Aetna announced in 2006 that it would close down operations in Middletown, there were about 3,500. Some of the Middletown workers were transferred back to Hartford, into space on Farmington Avenue refurbished after ING Group moved to Windsor. Others worked from home.
The building was emptied at the end of last month, except for a small Aetna data center in a separate building on the site, with about 200 employees. Few might have foreseen the possible demise of the building in 1985 when Aetna sold the building — but not the land — to a group of investors headed by GE Capital and signed a 25-year lease for the space.
The practice is common: It returns capital to the original builder and creates investment and tax benefits to the buyer. But the sales agreement also contained a provision that is now crucial. GE Capital would lease the land under the building from Aetna. If that lease isn't renewed at the end of the 25 years, the building reverts to Aetna. GE Capital didn't return several calls seeking comment. There are reasons to believe that GE Capital won't renew. Even though Aetna has leased the space, it has acted as though it were the owner, paying for maintenance and taxes.
If GE Capital does renew, it would have to take on those expenses, make improvements and find a new tenant. If Aetna regains control and decides to seek a buyer, the use would have to work with the far smaller data center on the site.
'Dead Center'
Large corporate construction projects aren't unknown even in an age of computers replacing the need for as many people or as much space for filing records. In 2007, ING completed the construction of a $100 million, 475,000-square-foot headquarters off Day Hill Road in Windsor. But even that is less than a third the size of the Aetna campus. Still, some say the Middletown campus is too much of a gem to lose, and while it can't easily be divided, a new use should be found.Edward J. Stockton, who was state economic development commissioner at the time of the construction, said he was "shocked" to hear that it might be demolished. Stockton, an economist and consultant for corporate relocations, said he believes the facility could be used for an education center or a medical facility. "It's almost dead center in the state," Stockton said. "Somebody is going to have to use some creativity here. It's not easy in this market. But you never know until you beat the bushes."
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Insurers Unfairly Demonized; Problem Of Cost Remains
March 28, 2010
From the start, Connecticut has had a significant stake in the successful reform of the nation's health care system. This past week, President Barack Obama signed a bill into law that will help many Connecticut residents get access to health care services. Across the country, an estimated 32 million people will soon have access to the protection offered by health insurance. These are important milestones by any measure.
While we remain concerned that health care costs will continue to rise too fast under the current health care reform provisions, the bill that President Obama signed into law this week will fundamentally change the health insurance market. I agree with the concern that health care costs are unsustainable, that average Americans and their employers are being priced out of the market, and that the system doesn't work for small businesses and individuals. That's why I'm proud to work for a company that has been putting forward proposals since 2005 to bring about meaningful reform.
When fully implemented, the new law will have a major effect on the market. Individuals and small employers will have more options and choices. The private sector will do what it does best — innovate to solve problems. Finally, the bill will support harnessing data that can make the health care system more efficient and work toward eliminating the 30 percent of health care spending that is wasted.
But to meet the affordability concerns of working families, we also need to get at the drivers of costs — hospitals, doctors, drugs and devices, as well as behavior and lifestyle choices. Insurance premiums are a result of these drivers — not the cause. In testimony offered on Capitol Hill last year, we offered proposals for tackling these drivers comprehensively through initiatives such as provider payment reform and a greater emphasis on prevention and wellness. For reform to be successful, we need all of the major players back at the table offering up innovative ideas to solve our collective problems.
Our industry played a key role in advancing many of the provisions that ultimately became part of the law. But somewhere along the way politics overtook policy, and health care reform became health insurance reform.
This shift gave rise to political rhetoric about our industry, and the people who work in it, that has been extremely disappointing to me and to our employees most of all. Demonizing an entire industry and its many thousands of employees is just bad leadership. The rhetoric ignores the reality of today. Our business is most effective when we listen to our customers and help them solve the challenges they face in the health care marketplace.
Our employees have a great sense for what works and what doesn't in the health care system, and they help make the system work better for our members on a daily basis. They are not alone. The health insurance industry employs tens of thousands of Connecticut residents and many more indirectly, pays hundreds of millions of dollars in taxes, and literally has an impact on every community in our state. But you wouldn't know it from listening to the people who represent us in Washington and here in the state.
Reform isn't done. There are years of regulations to be considered and implemented, and we will be an active participant. In the meantime, the people who I work with will continue doing what we do best — helping our customers and members. We will find opportunities in the new insurance market to improve peoples' lives. We will not be satisfied until the real issues of affordability are fully considered and addressed, and everyone truly benefits from health care reform.
Mark Bertolini is president of Aetna, a diversified health care benefits company based in Hartford with annual revenue of more than $34.6 billion in 2009.
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Aetna's Ron Williams on Health Care: What to Expect
At the Table: Charlie Rose talks to Aetna's Ron Williams
By Charlie Rose, Business Week Magazine
March 25, 2010
Nixon couldn't do it. Clinton couldn't do it. But on Mar. 23, after decades of debate, lobbying, and political wrangling, Barack Obama signed health reform into law. What does this new mandate mean for individuals, companies, and the health-care industry? On Mar. 24, I talked with one of the executives on the firing line, Chairman and CEO Ron Williams of Aetna (AET), which provides health-insurance benefits to more than 36 million Americans.
CHARLIE ROSE: How do you assess the health-reform bill just signed by President Obama?
RONALD A. WILLIAMS: I think it is a significant milestone because it will give millions of people access to health-care services. I would probably have done things a little differently. But this is now an opportunity to get to work on the fundamental affordability of health-care services, [because] the mischaracterization of our industry as the problem really didn't permit us to work in a collaborative way.
My impression is that the President listened to doctors, nurses, insurance companies, and every other element of the health-care community.
There was good dialogue, but for a variety of reasons there was a point in the dialogue—in the summer—when the focus shifted from health-care reform to health-insurance reform. But it's not too late. We're committed to looking beyond where we are now and getting back to what we need to do to really achieve affordability.
Will insurance premiums go up?
The answer is yes, and some of the things that will drive those premiums are significant additional taxes the industry will ultimately have to pay in the first year.
The President said that this bill would not have any impact on people who already had coverage, that it was about the uninsured, that there would be no change. Will this legislation change the coverage of people who are already paying for it?
My perception is, yes, things will change. You might not have a plan that includes the exact same doctors. You might have plans that have richer benefits, and therefore you're going to pay more for benefits you may or may not want. It would have been a better message to say, we're going to make certain you maintain your eligibility.
Clay Christensen of Harvard Business School said recently that in health care, competition does not help control costs but rather drives them up. He said the structure of the system pits hospitals that want to fill their beds against insurers that want to minimize reimbursement and access. His answer was the health-care provider and health-care insurer should be one and the same, suggesting an integrated system like Kaiser Permanente in California.
Well, I think it's an interesting idea. But all health care, ultimately, is local. There are communities where that model has worked well. Kaiser and Group Health of Puget Sound are examples of where that's worked very well. But it requires a unique physician culture. And even firms like Kaiser, which has tried to expand into other geographies, have found that it's incredibly hard to replicate. Where it can work, it's a fine model. It's just not going to work in most communities.
During this year of debate that you talked about, there was a moment in which Health & Human Services Secretary Kathleen Sebelius was concerned by Anthem Blue Cross in California proposing a 39% rate hike and wanted an answer from the insurance company and the industry as to why this was happening? Was it justifiable, especially at a time of recession? What was the answer?
I'll leave it to others to explain the exact increase, because it wasn't our firm that was doing it, but the generic answer I gave the Secretary was first you had an increase from the underlying rate of medical costs—inflation from hospitals, physicians, drugs, devices, technology. You then had the fact that as a result of the economy, healthy members who had been insured for some time but found themselves in tight economic circumstances were canceling their insurance. So you lose the subsidy that is keeping the premium affordable for the insurance pool. At the same time you had a third factor: Healthy young members, as a result of the economy, not entering the insurance pool. Finally there is simply the aging of the population in the insurance pool. And I think that to blame the premium on the health plan really doesn't get at the underlying forces.
Do you feel like the insurance industry was demonized in this debate that took place over the last year?
Yes, I do. And I think our 35,000 employees at Aetna were perplexed and really, I think, very disappointed in the leadership of the country and their selection to demonize and impugn the motives of employees, doctors, nurses, and pharmacists.
By that, you mean the President.
I mean everyone involved.
A Wall Street Journal editorial on Mar. 22 said the first result of reform will be turmoil in the insurance industry, and as small insurers find it impossible to make money, a wave of consolidation is likely. You've already said premiums are going to go up. Are we also going to see consolidation?
I'm much more worried about the solvency question. If you're a small plan and you experience costs that you simply weren't able to price for, there could very well be insolvencies. It's been a long time since we've seen them in the insurance industry, but the insurance commissioners know what can happen.
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Aetna's Middletown Employees Will
Move To Hartford In Next 6 Months
By Mark Mirko, The Hartford Courant
September 28, 2009
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| Aetna's values are depicted in a graphic on the atrium floor of the insurer's building at Farmington Avenue and Flower Street in Hartford, where preparations continue for the relocation of employees from the company's Middletown building. |
Three years of renovations at Aetna Inc.'s Hartford headquarters have all been one big lead-in to this weekend, when the health insurer will begin moving 3,600 Middletown employees to its Asylum Hill campus.
But the $220 million renovation project is still in full swing, including the installation of solar panels on the roof of the former Tower Building, at Farmington Avenue and Flower Street, and on the south side of the building, which faces I-84. A web of blue scaffolding now covers that side of the building, and workers are installing the necessary brackets on the building's smooth granite exterior. Five rows of solar panels are expected to appear in mid-October.
"The unique architecture of the building allowed for that," said Michael L. Marshall, who oversees Aetna's renovation and construction projects. "We would never have been able to do that on the other building."
The former Tower Building — now renamed the "Atrium Building" because each of its floors opens onto a large interior atrium — was built in the 1970s in the Modernist style, in sharp contrast to the Colonial Revival architecture of the main building.
The solar panels will be angled upward to catch the optimal amount of sunlight and won't be visually distracting to the tens of thousands of motorists passing by daily on the highway, Marshall said. The solar panels are expected to generate 6 percent to 8 percent of the Atrium Building's daily electrical supply. At a cost of $2 million, the insurer estimates that it will take 15 years to recoup the cost. The state is providing a rebate of about $800,000.
Fred Laberge, an Aetna spokesman, said the solar panels and other "green" innovations in the 1.7 million-square-foot campus are intended to project an image of Aetna's corporate culture. "It's not just the energy savings, but it's the right thing to do in terms of the green movement," Laberge said.
Since 2006, renovations have included the construction of two parking garages — one replacing an outdated one — that doubled the number of spaces to accommodate workers from Middletown, who will move in over the next six months. The majority of renovations have focused on the Atrium Building, vacated by ING in 2007. ING had occupied the building since 2000, when it acquired Aetna's financial services business. ING later decided to build a Connecticut headquarters in Windsor rather than renew its lease.
Aetna subsequently decided to give the space a much-needed renovation and consolidate operations from Middletown. Renovations are expected to be completed in six months. The campus will share a new cafeteria twice the size of the old one, as well as larger dining facilities. A new 28,000-square-foot "education center" will be used for training, a function once done in Middletown.
Most of the 3,600 employees moving from Middletown work in information technology. Of that number, 2,600 will be located in the Atrium Building; the remaining 1,000 will be in the main building, Marshall said.
Laberge said the workers who will now commute to Hartford will work schedules with staggered arrival and departure times to minimize traffic snarls on Asylum Hill. Workers are being given $50 monthly incentive payments to car pool or use public transportation.
Aetna built its 1,000,000-square-foot campus in Middletown but later sold it to GE Capital and leased the space back. It still owns the land. Laberge said that Aetna is in negotiations with GE over the future of the site.
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Despite Making Concessions, Insurers Face Renewed Attacks
By Janet Adamy, The Wall Street Journal
July 30, 2009
Health insurers are facing renewed fire from President Barack Obama and Democrats, but are still mostly on board with the president's effort to overhaul the U.S. health-care system. That's because the industry conceded months ago to key demands that Mr. Obama has just begun promoting. And insurers still have much to gain from an overhaul because they could get millions of new customers.
In a town-hall meeting Wednesday in Raleigh, N.C., Mr. Obama took aim at insurers as a way of selling his health plan. "The truth is, we have a system today that works well for the insurance industry, but it doesn't always work well for you," the president said. He said he wants to forbid insurers from denying coverage to people because they have a pre-existing illness, cap consumers' out-of-pocket medical costs and provide preventive care at no additional cost.
In fact, insurers have already agreed to stop denying coverage to the sick and charging people higher premiums because of their gender or health status, as long as lawmakers pass a requirement that most Americans have to carry health insurance. Such a requirement is part of most of the bills making their way through Congress.
"We really have enormous agreement about the insurance reforms," said Ron Williams, chief executive of Aetna Inc., one of the nation's largest carriers. Mr. Williams has met with Mr. Obama privately or in small groups six times, the company said, and the CEO has personally pushed for such changes as far back as 2005. "Consumers don't necessarily understand how the industry has changed and the commitments we've made to eliminate some of the challenges," Mr. Williams said.
Insurance-industry executives are privately complaining that the administration's rhetoric is eroding the consensus they have spent months trying to build with lawmakers, one industry official said. Another point of frustration is that the Senate is moving toward taxing insurers on particularly generous health plans to help pay for expanding coverage of the uninsured.
If health legislation succeeds, the industry would likely get a fresh batch of new customers. In particular, many young and healthy people who currently forgo coverage would be forced to sign up and pay premiums that would offset the cost of insuring older Americans.
Insurers have focused their opposition on some Democrats' push to create a new public health-insurance plan -- an entity they fear will drive private insurers out of business. House versions of the legislation include a public plan, but the Senate Finance Committee is expected to opt for nonprofit cooperatives that would pose less of a threat to private insurers.
Karen Ignagni, president of America's Health Insurance Plans, the industry's main lobby, said the battle over the public plan has been "obscuring the consensus about insurance-market reforms." The group recently began airing national television advertisements trumpeting its support for not rejecting people based on pre-existing health conditions.
Still, insurers are pushing back against several proposals that lawmakers see as favorable to consumers. One proposal would prevent insurers from charging older Americans more than twice the rates charged to younger people. Insurers want to be able to charge older people as much as five times more.
Some insurers also are calling for a higher cap on consumers' out-of-pocket costs and are warning that waiving charges for preventive care will simply lead to higher costs elsewhere. "If you put too low a cap on out-of-pocket expenses, that could drive up the premium," said Alissa Fox, a senior vice president at the BlueCross BlueShield Association, which represents 39 independent insurers nationwide.
Meanwhile, insurers continue to wage an aggressive campaign against Democrats' proposals to create a public health-insurance plan. America's Health Insurance Plans has stationed employees in 30 states who are tracking where local lawmakers hold town-hall meetings.
Big insurer WellPoint Inc. has set up an online network where it makes the case against the public health insurance plan and urges consumers to contact their elected officials.
Write to Janet Adamy at janet.adamy@wsj.com
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Aetna Profit Down 28 Percent In Second Quarter
By Diane Levick, The Hartford Courant
July 28, 2009
Aetna's net profits plunged 28 percent in the second quarter as pricing of health plans failed to keep pace with rising medical costs. The company chopped its earnings forecast Monday for the second time in two months. The Hartford-based insurer said that it will step up efforts to root out unnecessary medical tests and procedures, further trim administrative costs and raise prices as needed.
"Our 2009 [medical] trend is higher than we projected and our 2009 pricing was insufficient to cover these higher medical costs," Aetna CEO Ronald A. Williams told analysts on a conference call. "We are taking decisive yet thoughtful actions to put these execution challenges behind us and regain our momentum."
Although Aetna said it's realigning overhead costs because of lower projected earnings, company spokesman Fred Laberge said, "There are no job implications associated with today's announcement." Aetna had 7,206 Connecticut employees at the end of March, and the number has remained nearly flat, he said. Aetna had 35,225 employees companywide at the end of June, little changed from 35,276 on March 31.
Rising medical costs are at the heart of the debates over health care reform. Aetna and other insurers say they can control costs better than a competing government health plan would do.
The company reported $346.6 million, or 77 cents a share, of net income for the second quarter, down from $480.5 million, or 97 cents a share, a year earlier. Operating earnings, which exclude realized investment gains and losses and other items, were $308.5 million, or 68 cents a share, falling short of the Thomson Reuters analysts' consensus of 78 cents a share. Operating profit a year ago was $466.3 million, or 94 cents a share.
Aetna had to boost reserves for prior periods' claims by about $60 million because of higher medical costs than it projected. Claims are reflecting more expense per visit, such as more tests and other procedures, resulting in higher costs for emergency room, outpatient, lab and preventive services, the company said.
The company is increasing scrutiny of claims to determine whether all the services are appropriate and is adopting new reimbursement rules for second and third procedures that are done at the same visit, said company President Mark Bertolini. He promised "direct intervention" at certain hospitals to "ensure contract compliance."
Aetna lowered its forecast Monday for 2009 operating earnings to $2.75 to $2.90 a share, from its June estimate of $3.55 to $3.70.
Overall enrollment remained nearly flat at 19.05 million as of June 30, although commercial membership dropped by 64,000. Williams said that as Aetna raises prices to improve profit margins, "We would be willing to forgo membership growth if necessary to do so. We have a clear bias toward profitability over growth."
Aetna's stock closed down 72 cents, or 2.7 percent, at $25.72 a share Monday.
It will take Aetna several quarters to re-price its business, "and we believe that earnings-per-share risk remains heightened over the next quarter as medical claims from the second quarter further develop," said Matt Perry, health care services analyst at Wells Fargo Securities. "We do not expect much earnings per share growth in 2010."
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Ten Questions on the Health-Care Overhaul
The Effort to Change the System Enjoys More Support Than
Past Attempts, but the Complications Are as Acute as Ever
By Janet Adamy, Wall Street Journal
July 21, 2009
It is crunch time for health care. Lawmakers who are trying to fundamentally remake one-sixth of the U.S. economy say this might be the most complicated legislation they have undertaken. Here are some basics that everyone can grasp -- and probably ought to, because the health bill, if it passes, will affect almost everyone.
1. What is the problem with health care, anyway? Is it as bad as they say?
The problem, as advocates for change see it, boils down to two big areas: high costs and lack of coverage. For some households and employers, the cost of care already is out of reach, and many more will struggle to afford it if costs keep escalating. Medicare is eating up a bigger share of government spending, and a growing number of bankruptcies and home foreclosures are linked to medical expenses.
Even though the U.S. spends $2 trillion a year for health care, some 46 million people don't have health coverage. To be sure, that oft-cited number from the Census Bureau is somewhat misleading because it includes illegal immigrants, healthy young adults who don't think they need insurance and poor people who are eligible for Medicaid.
Still, as the recession wears on, the number of uninsured appears to be rising. One study, by the left-leaning Center for American Progress Action Fund, found that as many as 14,000 people are losing their health insurance every day because of job cuts. Families who have insurance pay an additional $1,000 a year in premiums to effectively subsidize all the people who receive care but don't pay for it, according to a separate study by the liberal group Families USA and actuarial consultancy Milliman Inc.
2. Can Democrats and Republicans agree on anything?
Actually, yes. There is broad support for changing the way hospitals and doctors are paid so that they are compensated for the quality of care they provide, not the quantity of procedures they do. Democrats and Republicans also back the idea of creating online marketplaces where consumers and small businesses can comparison-shop for plans.
Both parties want to bar insurance companies from denying coverage to people who are already sick. The insurers are willing to make that concession, as long as lawmakers also require most people to carry insurance, since that would force young, healthy people into the insurance system.
It amounts to a twin mandate -- one on insurers to sell policies, and another on Americans to buy them. Although there are pockets of Republican opposition to the latter idea, both have enough bipartisan support to pass. These steps alone would represent big changes to the status quo.
3. Where are the main points of disagreement?
The sharpest divide between the two parties: Whether to create a government-run insurance plan (otherwise known as a "public plan") that would go up against private plans in online marketplaces. President Barack Obama says a public plan will keep private insurers honest. Republicans say it would give the government too much control over health care.
The other main battle, which doesn't break down as easily along party lines, is how to pay for a plan expected to cost at least $1 trillion over a decade. Many lawmakers think it makes sense to impose a tax on employer-provided health-care benefits, a perk that currently is tax-free.
Then they looked at the poll numbers. Many voters hate the idea of paying taxes on something that right now costs nothing. So Democrats have instead proposed raising taxes on the rich.
Congress also remains divided over whether to make employers (except really small ones) provide insurance. House Democrats propose that if companies don't offer insurance, they should contribute as much as 8% of their payroll spending toward helping workers buy insurance on their own. Republicans argue that companies will make up for it by cutting jobs and lowering wages.
4. What would a public plan look like?
The country already has a huge public plan -- Medicare, which covers the elderly and some other groups. It generally pays doctors and hospitals less than private insurers. Liberal Democrats would like to replicate it in the new marketplaces. They want the government directly to set premiums and services under the plan, perhaps with basic and premium options.
That isn't going to fly in this Congress, despite Democratic control of both chambers. Republicans are more opposed to having a government plan than Democrats are bent on having it. Conservatives figure the government would quickly drive private insurers out of business by undercutting them on price.
Two other scenarios have emerged as compromises. One is to hold off on creating the plan and instead impose heavy regulations on insurance companies aimed at making coverage accessible and affordable. If that doesn't work, then the government insurance plan would kick in after several years. The other idea is to create a batch of regional nonprofit insurance cooperatives to compete with private insurers. But many liberals consider that a far stretch from the original idea, since the government wouldn't run those plans.
One point that gets overlooked in the debate is that most people probably wouldn't even be eligible for the public plan. Only individuals without affordable employer-provided insurance and businesses that aren't big enough to buy reasonably priced plans on their own would qualify.
5. Why is the total price of the overhaul so expensive, especially considering that it is designed to bring down costs?
The cost mostly comes from giving people subsidies to buy insurance, and from expanding Medicaid, the federal-state insurance program for the poor, to cover more low-income Americans.
The theory is that once more Americans carry insurance, the entire health system will spend less money caring for them. Those people will have more access to care that prevents them from getting sick in the first place, and they would rely less on costly forms of treatment such as visiting the emergency room. But it could be years before that really reduces health costs, if it ever does.
President Obama often talks about more fundamental fixes for high costs, like paying for quality and blocking doctors from boosting their income with unnecessary tests. But Congress has limited power to change that.
6. What are the most likely ways to pay for the overhaul?
The White House has proposed about $950 billion in savings over 10 years to pay for the plan that include things like lower reimbursements to hospitals that treat Medicare patients.
The wealthy are a natural target. One proposal is limiting itemized tax deductions for families who earn more than $250,000 annually, a campaign idea of the president. House Democrats want to impose a surtax on wealthy individuals. Less likely are new taxes on soda and sugary drinks, which many lawmakers see as politically unpopular.
7. Which industries are most likely to lose, and which to gain, from any overhaul?
Perhaps no industry stands to gain more from the changes than health insurers, who would get tens of millions of new customers because Americans would be required by law to carry health insurance. Pharmaceutical companies would sell more prescription drugs because more people would have coverage for drugs and access to doctors who prescribe them. Hospitals and doctors wouldn't have to provide as much free care as they do now.
But each of those groups also could take hits, particularly the health insurers if some kind of public option drives down their profit margins. The big losers would be retailers, restaurants and other businesses with low-income workers who provide little or no health insurance, since they would be forced to start paying for it.
Businesses that are too small to afford health insurance but not tiny enough to fall below the proposed $250,000 annual payroll cutoff that exempts them from providing coverage also could get squeezed by the legislation.
8. I already have insurance through my job - what happens to me?
Not too much at first. A handful of tax-free perks for the insured could get axed. For instance, lawmakers want to end the practice of allowing people to put money into so-called flexible spending accounts, which allow them to pay for everything from cosmetic dental work to surgery with tax-free dollars.
Longer term, a lot could change. For instance, your employer could drop coverage, preferring to pay the penalty for doing so and deflecting employees to Uncle Sam's plan. Cost-cutting efforts in other parts of the system could eventually affect employer-provided plans as well.
9. Politicians have tried for decades to push universal health insurance Why did they always fail before? Why would this time be any different?
These efforts stretch back to the 1930s, when President Franklin Roosevelt proposed creating a compulsory health-insurance system for all Americans, run by the states. Doctors, worried it would hurt their pay, helped kill the measure, buoyed by opposition from business and labor groups. Other major health overhaul attempts, most notably President Bill Clinton's 1993-94 effort, died because powerful interest groups feared their members would either earn less or have to pay more under the new system.
What is different now is that major health and other interest groups are on board with the idea. Many insurers, hospitals, doctors and drug companies agree that the system is so flawed it isn't sustainable, and they see a bill as a chance to push through improvements like adopting electronic health records, broadening the use of data to show which treatments work best and reducing the threat of malpractice lawsuits. Employers see it as a chance to curb the sharply rising price of covering their workers. Almost no one is arguing that the system is fine the way it is. Mr. Obama's high popularity, coupled with wide Democratic margins in Congress, also grease the wheels for passing a bill.
10. What happens if the effort once again fails?
Lawmakers would likely scale back their plans and try to at least pass a measure that partially expands insurance coverage or helps stall the increase in health costs. But so many parts of the legislation are intertwined that they will be less effective, and perhaps impossible to achieve, if done piecemeal. Lawmakers might be reluctant to take up the controversial legislation ahead of congressional elections next year. So it would probably be several years before lawmakers tried again.
Write to Janet Adamy at janet.adamy@wsj.com.
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From Here to Retirement
Editorial - New York Times
January 25, 2009
If you have a 401(k) retirement plan at work, you don’t need us to tell you that you’ve taken a hit in the past year. The really bad news is that the damage to your retirement security is likely worse than what the numbers say on your statement.
Many Americans didn’t have enough savings coming into the downturn. And employers are increasingly cutting back or suspending their 401(k) match. FedEx, Eastman Kodak, Motorola, General Motors and Ford, among others, have announced such moves.
There’s also no guarantee that today’s battered 401(k)’s will rebound powerfully. People close to retirement don’t have time for a do-over. Even for those still far from retirement, there’s no telling how stocks will perform in the future.
They could post impressive gains, especially in the near term, from their current low levels. But they could also struggle. The last 25 years was a time of low inflation rates and low interest rates, which boosted stock prices. Going forward, inflation and interest rates have nowhere to go but up, which would be bad for stocks.
It wasn’t supposed to be this way. Over the last several decades, businesses and government used matching contributions and tax breaks to encourage the proliferation of 401(k)’s. They lauded them as a way to harness the market to create wealth and increasingly viewed them as replacements for traditional corporate pensions.
In 1983, 62 percent of workers with retirement coverage had a traditional pension only, while a mere 12 percent had 401(k)’s. Today, approximately 20 percent have a traditional pension and about two-thirds have only 401(k)’s.
The shift to 401(k)’s also shifted investing risks and responsibilities from employers to employees, but as long as participants generally made money and recovered losses quickly, the risks seemed reasonable. Now many Americans are inevitably having second thoughts.
So far, the cumulative wipe-out of household retirement savings totals about $2 trillion, and no one believes that the downturn is anywhere near over. As a result, participants in 401(k)’s are in greater danger than ever of coming up short in retirement.
That grim reality calls for an expanded approach by policy makers to retirement issues. Traditionally — and correctly — an important focus has been on lower-income Americans who lack the means to save and tend to work for employers who do not offer retirement plans.
During the campaign, President Obama supported a better savers’ tax credit to encourage savings among lower-income Americans. He also supported universal I.R.A.’s, which would make a 401(k)-like account available to all workers. Those good ideas should be pursued. There are also good ideas for improving 401(k)’s that deserve attention, such as helping people manage their retirement withdrawals so that the money lasts a lifetime.
The wipeout in 401(k)’s has made it clear that it is not enough to get more people to save more. There needs to be a better way to reasonably ensure that a lifetime of savings can’t be undone by forces beyond one’s control. The Center for Retirement Research at Boston College, a leader in retirement policy, is advocating a new savings account — in addition to Social Security and 401(k)’s — that would enable risks to be shared among workers, retirees and the government.
After decades of promoting and improving 401(k)’s, in which employees bear substantial risk, that’s a new and difficult reality for policy makers to grapple with. The sooner Mr. Obama puts his team on the issue — his budget director, Peter Orszag, is one of the nation’s top retirement experts — the better.
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Health Insurers Get Poor Marks From Hospitals
UnitedHealth is rated worst of the bunch in a a survey of executives.
By Lisa Girion, Los Angeles Times Staff Writer
March 6, 2008
The nation's biggest health insurers lately have taken to rating hospitals on quality and cost, saying the information can help patients make better choices. Now, hospitals are giving insurers a dose of their ow n medicine.
A survey of hospital executives to be released today found some national insurers have image problems of their own. Three of the nation's five largest insurers had higher negative approval ratings than positive ones, according to the effort to gauge relations between hospitals and the insurers who hire them to take care of their members.
UnitedHealth Group Inc., which has contracts with 96% of the hospitals responding to the survey, was hit with the worst ratings. The Minnetonka, Minn.-based insurer received an "unfavorable" opinion from 91% of the hospital executives who responded, while 8% gave it a "favorable" rating. United owns PacifiCare of California.
Indianapolis-based WellPoint Inc., which owns Blue Cross of California, was second-worst with 48% unfavorable and 20% favorable. Philadelphia-based Cigna received 47% unfavorable and 44% favorable. Hartford, Conn.-based Aetna got the best score with 57% favorable and 37% unfavorable. Other positively rated insurers included Coventry/First Health and regional insurers that were rated as a group.
United challenged the findings and methodology of the report. "UnitedHealthcare ranks above the industry regarding claims payments," said spokesman Tyler Mason, adding that it pays more than 20 million claims a month -- 95% of them within 10 days. "We are working with many hospital systems to improve electronic claims submission to reduce the time to pay claims," Mason said. "Our goal is to work directly and collaboratively with hospitals to decrease administrative cost and complexity so that hospitals receive fair compensation for services at the same time balancing the overall healthcare cost in line with the consumer price index on behalf of our members."
A spokeswoman for Blue Cross parent WellPoint said it was reviewing the survey and that it took it upon itself to stay abreast of hospital executives' opinions through its own surveys. Jan Emerson, a spokeswoman for the California Hospital Assn., said the survey confirmed "what we are hearing from a lot of our member hospitals about health plans that operate in California, particularly the two largest ones, United and Wellpoint."
Davies Public Affairs, a Santa Barbara firm that represents some hospitals, commissioned the survey. It was conducted by Fabrizio, McLaughlin & Associates Inc., a polling firm whose clients include politicians, corporations and the American Insurance Assn. The results were based on interviews with 113 executives representing more than 500 hospitals, or 10% of all U.S. hospitals.
The findings could help consumers shop for coverage, said Brandon Edwards, chief operating officer of Davies. "It's definitely a wake-up call for the employers," Edwards said. "When you pick a health plan for your employees, think very hard about what the health plans' relationships are with their primary providers."
lisa.girion@latimes.com
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