Aetna CEO, Chairman and President Mark Bertolini praised the Affordable Care Act during the HIMSS12 Conference in Las Vegas this week, arguing that while the new law and its regulations have “pulled [the insurance industry] through the crucible” and “reshaped” the health care market, “For most of what has already been implemented, it has been a pretty good thing”:

So what will the health insurers look like in the future? Bertolini offered a strong endorsement of the accountable health organization model, positioning health insurers as uniquely suited to usher in an era of coordinated care. “We need to move the system from underwriting risk to managing populations,” he said. “We want to have a different relationship with the providers, physicians and the hospitals we do business with.” [...]

Pondering the future of the health care exchanges, Bertolini foresees the brands of health systems superceding those of health insurers. “We want to leverage or technologies and capabilities to allow you to be the face in marketplace,” he said.

Indeed, Bertolini says this new arrangement makes great sense from the perspective of the customer. The lack of coordination inherent in the current system stems largely from the various stakeholders acting rationally in their own self-interest. “For the patient it’s a nightmare. Think of a hockey game where everybody has their own puck.”

The Aetna chief also “discounted the prospect that the results of the 2012 presidential election or a Supreme Court decision striking down aspects of the ACA would deter the change,” noting, “Reform is not going to stop. It won’t go away.”

Insurers have generally accepted the inevitability of the ACA and have worked to shape its implementation to meet their needs. For instance, health lobbyists are pressuring Congress to repeal taxes on the industry, and have urged the Department of Health and Human Services to adopt exchange regulations that would allow almost all private insurers to participate in the new marketplaces and provide greater leeway for plans to design the standard essential health benefits package that will be offered in 2014. Insurers have also lobbied conservative governors to establish health care exchanges.

At the same time, the industry is preparing for the expansion of new customers. Last September, Cigna — one of the nation’s largest health insurers — kicked off a $25 million ad campaign designed to attract the individual consumers who will begin shopping for their own policies and the industry joined forces with health care and consumer groups to form the “Enroll America” campaign, an effort to “encourage states to make it easy for people to sign up for coverage, by providing model regulations” and “get the word out among the uninsured, through advertising and community outreach.”

Sam Stein reports that “[h]ealth insurance giant Aetna is planning to force up to 650,000 clients to drop their coverage next year as it seeks to raise additional revenue to meet profit expectations.” One industry analyst told Stein, “[t]hey were surprised by an acceleration in medical costs in 2009 which pressured their earnings.” “In an effort to get back to a more profitable level, they are raising their prices to match cost trends. When you raise rates, you run the risk of losing your membership. Health insurance is a very competitive marketplace“:

“The pricing we put in place for 2009 turned out to not really be what we needed to achieve the results and margins that we had historically been delivering,” said chairman and CEO Ron Williams. “We view 2010 as a repositioning year, a year that does not fully reflect the earnings potential of our business. Our pricing actions should have a noticeable effect beginning in the first quarter of 2010, with additional financial impact realized during the remaining three quarters of the year.”

The customers Aetna is targeting could have sicker profiles, but they could also be located in areas of the country where Aetna doesn’t have the market clout to negotiate cheaper rates with dominant providers. For Aetna, the customers may be more expensive because the insurer has to pay doctors and hospitals more than its competitors, not because they are significantly sicker than the average beneficiary.

As Princeton health economist Uwe Reinhardt explains it:

REINHARDT: It depends on the market power. If you face, as a hospital, a huge insurance company, they will bargain for a steep discount. But if you’re an uninsured, middle-class individual, you have no market power, and they will charge you often twice the price that would be charged to an insurance company.

NPR: So if I’m – sorry, so if I’m a massive insurance company, I can say I’m going to bring you 75,000 MRIs this year, you’d better charge me very little for them, whereas if I’m one uninsured person, I’ve got no bargaining power. Is that what you’re saying?

REINHARDT: That’s what it is. The insurance company will say look, we lower the price, but you can make it up on the volume, we bring you big volume, while the individual says I bring you one appendix. That’s not a volume. And so they can jack up the price and take what they want from you.

In 2001, Aetna felt like providers in certain areas were doing just that — charging the company too much for medical services. “Aetna completely overhauled its business between 2000 and 2003, going from 21 million members in 1999 down to 13 million in 2003, but boosting its profit margin from about 4% to higher than 7%.” The company pushed out almost 8 million enrollees by increasing their premiums and then pulled out of those insurance markets. “The most important characteristic…is that they were in markets in which we did not have very significant presence. So that the contracts that we had with the doctors and the hospitals were not as favorable as that of our competitors,” Jack Rowe, Aetna’s former CEO told PRI’s This American Life.

A recent analysis of the Massachusetts health care market concluded that “insurance companies pay some hospitals and doctors twice as much money as others for essentially the same patient care.” The report found that “payments were most closely tied to market leverage, with the largest hospitals and physician groups, those with brand-name recognition, and those that are geographically isolated able to demand the most money.”