CONSOLIDATION of Aetna Life & Casualty Co. with U.S...

April 17, 1996

CONSOLIDATION of Aetna Life & Casualty Co. with U.S. Healthcare Inc. to form the nation's largest managed health-care company shows how breakneck changes in the private sector are outstripping government reform efforts. While Congress debates popular fringe issues and states struggle against Medicaid costs, insurors, managed-care companies, Blues, hospitals and doctors are fighting, merging and reinventing themselves as a confused citizenry tries to cope.

Survival is the common denominator. The huge new Aetna could be one of the few national health maintenance organizations left on the playing field as smaller HMOs fall by the wayside. Physicians groups and hospitals are joining together in an effort to avoid HMO control by offering coverage directly to consumers. Local HMOs and Blue Cross operations seek to protect their own competitive advantage.

In this battle, employers play a key role. Plagued by double-digit jumps in health insurance costs for workers, they increasingly optfor managed care to protect their bottom line. Big corporations bargain fiercely. Smaller companies learn to pool their leverage. Self-employed people continue at a disadvantage, with little help from government. And 44 million Americans without insurance lean more and more on entitlement programs that must be capped if the federal budget is to be balanced.

Now comes the Aetna-U.S. Healthcare juggernaut, whose chairman vows "to redefine the way health care is delivered in this country." An old-line fee-for-service indemnity company with declining profits, Aetna's decision to spend $8.9 billion for U.S. Healthcare reflects a determination that "if you can't beat 'em, buy 'em." U.S. Healthcare has leaped to the top by pressing health care providers to hold down costs, monitoring quality and channeling more than a quarter of its revenues to stockholders.

There is little prospect and not much desire to stop the trend toward some kind of managed care. Its cost effectiveness and beneficial emphasis on preventive medicine are regarded as the wave of the future. But as the industry consolidates, serious thought needs to be given to how the health dollar should be divided and how the public interest should be protected.

Pub Date: 4/17/96

Health care means managed care; Aetna acquisition: As insurers merge with HMOs, what about providers and consumers?

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