On a June evening President Obama was hosting a Nightline special at the White House on health care. Diane Sawyer posed a question to an HMO executive in the audience, Aetna Chief Executive Ronald Williams. With premiums and profits always rising, she asked, is the President right that your industry needs a new government-run public plan to be "kept honest"? Williams smiled and said no. "It's difficult to compete against a player that's also refereeing the game," he said. The President then got his turn and muffed the name. "First of all I want to say that Mr. Walters has been very cooperative," he said, going on to explain why reform must include a public plan.

Not, until now, much of a public persona, Williams, 59, is taking a surprisingly visible role in arguing for change in the health care system. He has met with Obama a half-dozen times (he shrugs off the surname gaffe), has testified four times in front of Senate committees this year and participates in shindigs set up by the many trade groups for which he's a director.

Williams' position echoes that of the HMO industry generally: He's against a government-run plan but favors universal coverage and forcing insurers to take all comers. He advocates cutting costs by standardizing payments among insurers, doctors and hospitals. "I don't meet anyone who doesn't think we should get more people covered," he says.

But comments like that are drawing the criticism that, while he is now calling for expanding coverage, his company has profited in the past by deliberately covering fewer people.

Williams joined Aetna in 2001, recruited by his predecessor, John Rowe. During their run from 2001 to 2006, after which Williams took over, the company went from losing $266 million to earning $1.7 billion. The turnaround was mostly credited to the decision by Williams to dump millions of members who were deemed unprofitable. From 1999 to 2004 membership fell by 8 million. Aetna cost "thousands of workers their jobs and millions of other people their insurance coverage," says Wendell Potter, a former Cigna executive. Williams responds, "We wish we had kept every customer." He says that when Aetna raised its premiums to cover costs, customers left.


Williams, who has earned $54 million since he was promoted, says Aetna is "well positioned" for a shift in the insurance system. "It's a result of conscious strategic work on our part," he says.

While a public plan would likely damage all HMOs, Aetna might get hurt the least because such a plan would mostly scoop up small businesses and individuals, not Aetna's huge customers, like Bank of America and UPS. Aetna is only a bit player in the individual insurance market, covering 400,000 out of 18 million. If reformers create some kind of public marketplace in which people would buy coverage, Aetna could find new opportunities, by selling to these folks without going through expensive retail brokers, the modus operandi of Blue Cross and Blue Shield plans. Williams also never went deep into the Medicare HMO business, now threatened with 14% reimbursement cuts.

In the short term Aetna has bigger problems. The company reported a 28% fall in profit in the second quarter. Aetna's actuaries didn't see a rise in claims and priced coverage too low. Aetna now estimates it will pay out 85 cents in claims for every dollar it receives in premiums. That's 5% higher than last year. Williams says the company is fixing the problem. Barclays HMO analyst Joshua Raskin predicts that by next year Aetna will right the ship--by cutting 600,000 members.