Health Reform, TRICARE Awards, Medicare Dominate Earnings Calls

Health reform and the continued enrollment losses in the economic downturn were just a few of the hot topics among U.S. health insurance chiefs during second-quarter earnings conference calls.

Posting higher profits were UnitedHealth Group, Cigna and Humana, while WellPoint's and Aetna's net incomes were lower on investment losses and higher medical costs. Health Net's profit dropped, in part, on costs related to its Northeast U.S. health plans, which in July it said it plans to sell to UnitedHealth.

Other developments -- UnitedHealth and Aetna were awarded multibillion-dollar contracts from the Department of Defense to provide health services for the TRICARE health plan for active-duty and retired military service members and their families, replacing Humana and Health Net (BestWire, July 14, 2009).

Government Plan Not Needed

Angela Braly, president and chief executive officer, WellPoint: We believe that a government plan is unnecessary and we urge Congress to take the opportunity to fundamentally address the underlying causes of rising health care costs. Managed care organizations are the component of the health care system that [have] the best ability to favorably impact the cost curve.

Ed Hanway, chairman and CEO, Cigna: Future Medicare Advantage reimbursement rate cuts are very likely, as these cuts are viewed as a means to finance health care reform...Proposals for tax increases on individuals, on benefits, on employers, and on the insurance industry are all being discussed as possible solutions...None of these proposals address the real issue of lowering health care costs and improving access and quality.

Mike McCallister, president and CEO, Humana: Through Availity, the multipayor, multiuse electronic provider portal that we co-founded in 2001, we've shown the way toward fulfilling the president's call for a workable health care IT superhighway, with attendant standardization, transparency and significant cost savings. More specifically, electronic prescribing like Availity CarePrescribe, has reduced preventable adverse drug events by 61%.

Stephen Hemsley, president and CEO, UnitedHealth: We think getting to an outcome that truly modernizes our health system requires legislation that focuses on costs and consistent care quality by modernizing the health care system, not just expanding coverage or raising taxes.

TRICARE Protests Filed

McCallister: In light of our 13 years of TRICARE experience and numerous awards for superior customer service, this was not what we had expected. Following the debrief with [Department of Defense] officials on July 16, we decided to file a formal protest, which we did on July 22.

Hemsley: Our public and senior markets group will be further strengthened under the TRICARE Southern Region contract awarded to us...covering services to 3 million people. This is one of the largest-scale assignments we have undertaken.

Jim Woys, chief operating officer, Health Net: We recently filed two protests with the Government Accountability Office in connection with the July 13 award decision. The grounds for the protest are potential issues surrounding the public release of Health Net's initial proposed price, potential flaws in the proposal evaluation process and other factors.

Stay West

Jay Gellert, president and CEO, Health Net: We have scale in California, particularly in Southern California...Arizona is showing very encouraging improvement...We have time to right-size our company for the new, leaner Western health plan company that will emerge following the sale of Northeast.

Medicare's Fiscal Crisis

McCallister: The Medicare Advantage program is vital to any solution to Medicare's impending insolvency because it is the only place where seniors have access to proven cost containment measures, but also improved health outcomes... Any payment reform proposals that have the effect of pushing seniors back into original Medicare can only exacerbate the program's fiscal crisis.

Medical Cost Management

Ron Williams, chairman and CEO, Aetna: Our 2009 trend is higher than we projected, and our 2009 pricing was insufficient to cover these higher medical costs. We are taking decisive, yet thoughtful, actions to...regain our momentum. These actions include...increasing the frequency and intensity of medical cost management processes while ensuring that members receive high-quality, cost-effective care, implementing provider contracting and reimbursement initiatives to ensure consistency with evidence-based clinical protocols.

(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)