May 1, 2008: 6:59 AM EDT
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'We all pay for the uninsured'

Optimistic but practical, Aetna CEO Ron Williams defends the U.S. health insurance industry.

By Geoff Colvin, senior editor at large

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Where he stands: CEO Ron Williams, outside Aetna's Hartford headquarters, believes that information, outreach, and technology can go a long way toward fixing U.S. health care problems.
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Waiting to exhale: Aetna works with the Lutheran Medical Center in Brooklyn to make insurance available to people who lack it.

(Fortune Magazine) -- Voters are more worried about health care than about Iraq, according to recent polls, making it a key political issue - and leading many health insurance company CEOs to keep their heads down. Aetna's Ron Williams has been an exception, speaking up on many major issues, though declining to endorse any candidate's health-care proposal. Formerly Blue Cross of California's president, Williams came to Aetna as COO in 2001 when the company was on the brink of failure. He and CEO Jack Rowe engineered a turnaround that increased the company's value from $3 billion then to $21 billion today. Williams succeeded Rowe as CEO in 2006. Before an audience in the Time & Life Building in Manhattan, Williams sat down with Fortune's Geoff Colvin. Edited excerpts:

In most industries rising revenues are regarded as good. Why is it that in health care, rising revenues are regarded as a grave national problem?

I think the U.S. is conflicted. When it comes to our own health care, we all want the best - access to the latest and most important technology. At the same time, health care is typically purchased in an institutional setting. So we purchase it in the aggregate, but we consume it as individuals. Today the U.S. spends about $2.2 trillion a year on health care. As an industry we have to do a better job of describing how we help people get access to the health care they need and improve the quality of care they're given, and how that $2.2 trillion could easily have been $2.4 trillion.

Why does the U.S. spend so much more per capita than any other country?

We are a wealthy country. We also are the global engine of innovation in health care, whether it's the pharmaceutical industry or the creation of medical devices. Our health-care delivery system is different from many others in that we have a smaller group of primary-care or family-practice physicians and a much larger base of specialists. There's at least one economist who argues that the increase in health-care costs has actually been a positive in the context of productivity in health in the U.S. So in a lot of ways we're getting what we want, which is more health care, more access, and more technology.

One criticism is that the U.S. devotes too much spending to administrative costs, and the health-care industry gets blamed for some of that. Is that valid?

We spend about 11% [of revenues] on sales and general administrative expenses, but we've invested an enormous amount in technology and innovation to get at the real cost drivers in health care, which we believe to be poor quality and lack of clinical decision support. Physicians today don't have any real decision support tools.

What's an example?

The idea that best practices as determined by, say, cardiac specialists would be available in computers that physicians could access along with your complete medical history, to apply with their clinical judgment to make certain you're getting the best quality of care. Today that doesn't exist.

Can any individual company create that? Inevitably there will be all kinds of other entities involved.

Ultimately we have to connect the system in total. In the interim we do believe - and it's a big part of our strategy - that we can use the information and data that we have. For example, we know every physician that you've seen if you're one of our members. We know that you had lab tests conducted, and we know the actual lab values for those tests. We also know the prescriptions that have been filled and therefore the medication that you're on. We can apply that to computer decision support rules and determine, for example, that you have a cardiac condition and that when you saw a dermatologist, you neglected to mention that. The dermatologist writes a prescription that interacts with your condition. We have the ability to use that data to reach out to your physician. It's an imperfect solution. It's not as great as having the whole system connected, but I think it will have a very significant impact on the quality of health care.

When buying health care, most of us don't behave like regular consumers. Seven out of eight dollars we spend is somebody else's money, and we don't have very good information about doctors or hospitals. What's the outlook for better information?

At Aetna, in 35 markets, you can go online and know what your physician will charge you before you see that physician. That's helpful for a routine service, but when it comes to, say, a serious cardiac condition, what you really want to know is whether this is a high-quality physician. We think there is data available. There's going to be a huge transformation in this area.

Who are the uninsured, and how can we get them covered?

I'm always amazed that 20% of the 47 million uninsured are eligible today for Medicaid or the Children's Health Insurance Program. They could sign up and have a relationship with a primary-care physician. About 10% of the 47 million are college and university students, very inexpensive to insure. Slightly more than 20% are not citizens but are in the country legally.

We might find a way to link visa entry or other mechanisms with comprehensive coverage. And about 20% have household incomes above $75,000. On this we agree with many of the presidential candidates. Aetna believes there is a place for an individual coverage requirement for individuals who can afford insurance. I think reasonable people could agree that at some point there's enough income that someone should be expected to participate in the health-care system. That leaves us with about 14 million to 17 million who really need tax credits and subsidies or tax deductions.

An individual coverage requirement would force people to buy what you sell. Tell me why this is the best solution.

Today we all pay for the uninsured. If an individual sticks up a bank and walks off with $25,000, there are consequences. If someone who really could have had an insurance policy consumes $25,000 worth of health care, everyone else pays for that. The average employer is paying 12% more in premiums today to cover the uninsured than they would pay if we brought those 47 million into the system. So for every group we bring in, health care becomes more affordable.