Health Insurers Turning Into Who Knows What?

Squeeze on profits will continue to transform the industry. 

image of health insurance providers

As I wrote last week, one of the nation’s biggest employers — Boeing — is pioneering a concept in providing health care benefits to its employees that eliminates insurance companies as middlemen.

What Boeing is doing represents a seismic shift in health care financing and delivery that potentially will have more far-reaching effects than Obamacare, primarily because it is coming from the private sector, not the government. It is a shift that the big health insurers have been anticipating and preparing for since long before the Affordable Care Act was enacted.

We tend to think that insurers with well-known brands like Aetna, Blue Cross, Cigna and UnitedHealthcare have been around forever and likely will always be with us as they are currently structured.

But the large corporations dominating the health insurance landscape bear little resemblance to the companies they were when they first appeared on the scene. Their current metamorphosis is just a continuation of a corporate evolution.

I’m not suggesting they will disappear, but I am willing to bet that in a few years, they will not be providing our health insurance coverage — at least in the way they do now. Instead, they will have transformed into companies that make most if not all of their profits in non-insurance lines of businesses.

You only have to look back a few decades to see just how dramatically the big insurers remade themselves as a result of pressure from both Wall Street and the marketplace.

Take Humana, where I used to work, as an example. Humana began as a nursing home company in 1961. When I joined the company 27 years later, it had sold all of its nursing homes and become the world’s largest hospital company. A few years later, it sold all of its hospitals and became Humana the managed care company.

I left Humana to join Cigna in 1993. Cigna, which started out as a fire and marine insurance company, had by then morphed into one of the world’s largest multi-line insurance companies. Its peers were Aetna — which initially was just a life insurer — MetLife, Prudential and Travelers. All were selling health insurance by this time. But within a year or so after I joined Cigna, Wall Street decided that multi-line insurers were dinosaurs and insisted that the companies divest some of their businesses so they could focus on just one or two.

MetLife, Prudential and Travelers all sold their health care business and Aetna and Cigna decided to get out of the property and casualty business to focus on health care.

Over just the last 25 years, all of these companies had changed dramatically to concentrate on businesses that were deemed to be more profitable than other business lines that once defined them.

As for UnitedHealthcare and WellPoint, few people had even heard of them 25 years ago. But thanks to cash generated by the divestiture of their original non-insurance businesses, they were able to buy their way into managed care. They quickly ballooned in size to become the nation’s largest health insurers.

Now that the profit margins of those big companies’ core health insurance businesses are under intense pressure because of Obamacare and changes in the marketplace, you can rest assured that their top executives are at work on new transformation blueprints.

If you look at their websites, you’ll be hard pressed to even find the word “insurance.” They all are in the process of redefining their missions—and looking outside of the U.S. for new opportunities. Rather than describing what they sell in any explicit way, they use vague language that seeks to describe what they have become or aspire to be and do.

Humana says its primary focus “is on the well-being of its members.” Aetna says it is “transforming health care to create healthier communities, a healthier nation and a healthier world.” How? By “creatively destroying the current business model to enable a new one,” said CEO Mark Bertolini at a health care technology conference earlier this year.

Cigna CEO David Cordani says his team “is proud to serve as a catalyst for change in the more than 30 countries in which we operate around the world.”

According to UnitedHealth Group’s website, it is “the most diversified health care company in the United States and a leader worldwide in helping people live healthier lives…”

WellPoint says it is “working to transform health care with trusted and caring solutions.”

Even the nonprofit Blue Cross plans are reinventing themselves. Florida’s largest insurer, Florida Blue, earlier this month unveiled its new corporate parent, GuideWell. Said CEO Pat Geraghty at the Medifuture conference in Tampa: “We’re not here to be the best plan in Florida. We’re here to be the best health solutions company in the United States.”

What all of those companies’ executives understand is that if profit margins are to be maintained in the post-Obamacare world, finding greener pastures has once again become a necessity.

Wendell is a senior analyst at The Center for Public Integrity where this first appeared on 9/22/2014.

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