AETNA: Insurer’s Troubles Raise Questions About the Future of HMOs

      As backlash against managed care continues, Aetna has become the "biggest target in an industry under siege," the New York Times reports. In a profile of the insurer's efforts to rebound, the Times notes that Aetna's troubles "raise questions about whether the traditional HMO approach to paying for health care has a viable future." According to some analysts, Aetna's situation is a sign that "HMOs are in a very precarious position." Larry Feinberg of Oracle Partners said, "The model we all love to hate will become extinct in the next five years." Aetna's main challenge is to somehow hold down costs while offering choices and avoiding "wrath from doctors and patients alike," the Times reports. But in a booming economy and a tight labor market, that task remains difficult, as people are choosing health plans that offer them the most freedom and flexibility -- such as Empire Blue Cross and Blue Shield of New York's preferred provider plans, which experienced a 16% rise in enrollment last year. In addition, HMOs' cost-containing efforts have been hamstrung by drug companies, which have latched onto direct-to-consumer advertising to boost demand for expensive prescriptions, and by patients themselves, who consult Internet health sites and then bombard "doctors with questions that can stretch office visits and spur more tests and prescriptions." Despite the dire predictions of some analysts, others say that HMOs could make a comeback in a weaker economy because they remain cheaper than other health plans. Until then, however, Aetna CEO William Donaldson has pledged to improve the company's relationships with physicians and hospitals, and to "do a better job of meeting the expectations of customers and patients" (Freudenheim, 3/19).