To Joe Zubretsky, CFO of $27.6 billion Aetna Inc., reforming the $2.2 trillion health-care system requires a public and a private approach. For the Hartford-based insurer, it also means taking bold action both internally and externally. Internally, Aetna is rationalizing costs through technology investments that predict medical trends and give consumers the data necessary to make prudent health-care choices. Those steps, says Zubretsky, have powered Aetna's steady growth, as evidenced by its more than 17 million members and its consistent 15 percent annual returns. On the national stage, Aetna is advocating a 10-point reform plan that addresses the interrelated issues of cost, quality, and access to care. Ultimately, says the 51-year-old CFO, "we believe that the system of employer-based coverage needs to be part of the solution. It works."
Your IT systems are so integral to your strategy that your CEO describes Aetna as a health-care insurance/technology company. How does IT help control health-care costs?
Our whole strategy is built around information and making sure consumers truly understand the cost of health care. One of the failings of the system is that consumers often see only the fraction of their premium that is deducted from their paychecks; they don't see the whole bill. So [our information technology allows us to] create a better awareness of the differences between branded and generic drugs and [identify] facilities that have higher-quality outcomes perhaps at a lower cost.
To produce that information, Aetna invests many millions of dollars annually. Do those investments produce better financial returns?
The answer is absolutely yes. Our systems help us forecast medical trends and maintain internal vigilance over the financial and operational complexities of this business. We have a platform that provides incredible insights into how medical trends behave across all of our customer segments, geographies, and product lines. And [in this business] if you can't forecast medical trends, you'll never be able to price and maintain your margin profile.
How do you gauge your accuracy in predicting medical trends?
Our medical-benefit ratio [medical costs as a percentage of premium dollars] is what reflects that accuracy and produces our growth margin. It's a very complex science across many products, many geographies, and many customer segments. But if you can do that with a great deal of predictability, investors will have confidence that you have your arms around medical trends.
Many hospitals and doctors are reluctant to provide outcome information. How do you overcome that?
It will be evolutionary. But, ultimately, if we want a free-market system, people need to know what things cost. It's all about engaging consumers, making sure they understand what it costs, having them make prudent decisions, and getting only the care they need.
Aetna was the first national insurer to publicly endorse the idea that everyone should have basic health insurance. Should that be the basis of any national health-care reform?
Everybody believes that the situation in which we have 47 million uninsured Americans is unacceptable. But we also believe that the employer-based system, which basically insures 60 percent of the 300 million Americans, works. It has all the features that the politicians say they want. They want risk pooling, they want financing, and they want convenience. And our opinion is that upsetting a model that already works to solve the smaller problem, albeit a severe problem, makes no sense.
What improvements do you support?
We think the tax system is unfair. People who buy their coverage at the workplace can buy it with pretax dollars but in the individual marketplace they're paying with after-tax dollars. That can be equalized. We believe that the safety net for individuals who can't afford access to health care isn't sufficient. And we really need to look at the current federal poverty levels at which people qualify for Medicaid and other federal programs.
What should be the role of the health-care industry in any reforms?
We think a public-private partnership, without upsetting the tried-and-true system of employer-sponsored health care, makes sense. Finding ways to make it easier for small groups of individuals to buy and afford health care [is a promising area].
If the employer-based system remains, what assurances do CFOs have that their health-care rates will stay in check?
Health-care insurance premiums are not the problem. The problem is health-care costs. And the studies all show that 70 to 80 percent of health-care costs are due to chronic conditions — many of which are due to lifestyle choices. In addition, approximately 30 percent of costs are actually inefficient or unnecessary. So we need to find ways to reduce the growth in health-care costs through the services we provide — disease management, wellness programs, and preventive procedures.
Can you give an example?
At Aetna, we have the same problem: our costs were trending at a rate that was just unacceptable. So we developed a consumer-driven program and made preventive, wellness, and coaching tools available. Employees can earn up to $600 by getting a health-risk assessment, getting into an exercise program, and [practicing] proper nutrition.
Are you a participant?
I'm pretty much a self-motivator. But I can see firsthand what being healthy can do and how fun [it can make] life.