Health insurer's staff frets about reform

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Tess Vigeland: As we mentioned earlier, the Obama administration may be backing away from the idea of having a government-run insurance plan that competes with for-profit insurance companies.

But the president is still hoping to squeeze big-time savings out of an industry that brings in roughly $700 billion a year, while leaving millions of Americans under-insured.

Sounds great, unless you happen to work for an insurance company. As part of our series "The Cure," Joel Rose reports.


JOEL ROSE: I wasn't the first person to ask for a tour of Aetna's campus in the Philadelphia suburb of Blue Bell. Apparently, the company's clients do it all the time.

DON Liss: They want to come and see the operation. And we say, well, it kind of looks like cubicles. They say, dammit, we want to see it!

That's Don Liss, Aetna's director of medicine for the mid-Atlantic region. He escorted me from one end of the campus to the other. For an industry that generates billions of dollars in profits each year, and that's at the center of a national drama, there isn't much to see. Just lots of people sitting in cubicles, poring over claims, processing premiums, and making decisions about who gets insurance, and who gets denied.

CHRISTY Rue: One of the big misconceptions is that someone is sitting at a desk rubber-stamping things negatively.

Christy Rue was a hospital nurse for 10 years. She doesn't have a rubber stamp. But as a case manager it's her job to explain to patients what their Aetna policies cover and, more often, what they do not -- and why. Like other Aetna employees I talked to, Rue is acutely aware that people think she works for the evil empire.

Rue: When I first came here, people said, "Oh, you went to the dark side." Your hospital cohorts would joke like that. But for me as a nurse, I couldn't work in a job where I wasn't doing what I went into this field to do.

Rue is one of 4,000 Aetna employees who work on this campus alone. Aetna has offices all over the country. Overall, the insurance industry employs roughly half-a-million people nationwide in sales, marketing, underwriting and lots of other administrative jobs.

Jacob Hacker teaches political science at Yale. He says private insurers spend 12 cents of every dollar on administrative costs, compared to only 2 cents for Medicare.

JACOB Hacker: Private insurance companies are dealing with a system in which there's lots of reasons why they need to spend money on administration.

Hacker says a big chunk of that spending is devoted to figuring out who's too risky -- meaning, too sick -- to cover. Insurance companies also have to deal with regulations that differ from state to state. These are some of the reasons Hacker and others want to see a new, government-funded health insurance option.

Hacker: The public plan doesn't have to earn profits. It can have a much more simple process for paying providers. The money that's spent now trying to screen out high-cost people, the money that is spent now to deal with a patchwork of different state rules, all that will be reduced.

Hacker says "all that" could be more than $100 billion over 10 years. Not a big share of the $1 trillion or so needed to pay for health reform, but not insignificant, either. Big insurers hate the idea.

Alan Katz is a former VP at insurance giant WellPoint, and now writes a blog about the industry.

ALAN Katz: If a government-run plan is introduced in the marketplace, there will be an irresistible temptation for lawmakers to tinker with it, and to pile on advantages that will eventually lead to a death spiral in the marketplace.

Katz says that "death spiral" would be a lot less likely if lawmakers decide to create a system of nonprofit insurance cooperatives, which is also being discussed. One way or another, private insurance companies are probably going to face more competition. That means they'll have to cut costs and maybe, jobs.

Yale's Jacob Hacker thinks many of those workers would be able to find different positions in health care.

Hacker: These people are going to be a vital part of reform, because they're going to be working in areas where they're really improving the delivery and quality of care, rather than just engaging in endless disputes with providers about billing.

That sounds promising. But to Christy Rue and the other 35,000 people who work for Aetna, it sounds like a lot of empty cubicles.

In Blue Bell, Pa., I'm Joel Rose for Marketplace.

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