Humana CEO preaches power of health care consumer

AP News
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Posted: Feb 24, 2011 12:46 PM
Humana CEO preaches power of health care consumer

The last few years tested executives in almost any corner of corporate America, thanks to a brutal recession and a slow recovery.

The pressure rose a couple notches higher for health insurance providers. That's because CEOs like Michael B. McCallister of Humana Inc. also face a federal overhaul of the health care system and widespread customer scorn over steep premium hikes.

McCallister, 58, wades into these challenges with the big-picture perspective one gains after spending more than 36 years with the same company. During that time, Humana transformed its business from operating hospitals to become the fifth-largest U.S. health insurer.

Based in Louisville, Ky., Humana sells individual and employer-sponsored insurance. It also specializes in Medicare Advantage plans, which are subsidized versions of the government's Medicare program for the elderly and disabled.

Business has been good for Humana. Its earnings dropped in the fourth-quarter but the insurer still made $1.1 billion last year.

McCallister recently talked about his tenure and the industry in an interview with The Associated Press.

Q: You never aspired to be a CEO. Yet nearly 11 years later, you're the longest-tenured leader of a major health insurer. Humana had lost $382 million in 1999, the year before you took over. Why did you apply for the job?

A: I had worked on a number of hospital turnarounds across the country. The company was in a position where it was going to need a turnaround, so that was something that didn't deter me.

I had a lot of personal investment in Humana and its history and where it was, and I hated to see it flounder. That's really what drove me to hold my hand up and ask for the job.

Q: You've said your experience with hospitals offered a broad view of the health care system and gave you a chance to learn where the real weaknesses are. What's an example?

A: Foremost is the fact that consumers have absolutely no clue what price or quality looks like in health care.

People would seek out care, and they never asked the questions what does this cost, what are my options? They just sort of stumble through the system. Then as a hospital CEO, they would come in my office and say, "Explain this bill to me," and it would be two inches thick.

You'd see the frustration on their faces when they're trying to understand what's happening to them, both clinically and financially.

Q: You've been a big backer of high-deductible, low-premium insurance plans, which expose patients more to health care expenses outside the typical $20 doctor's office copay. Why do you feel this is so important?

A: In the rest of the economy, you have incredible power in the hands of the consumers. Bad services and bad products essentially get crushed. The consumers can be quite powerful when they apply their knowledge and their buying power to anything.

I just think when we have a financial stake in decision making, we pay a little more attention to what our options are, we're going to demand higher quality, we're going to demand better service and the rest of the economy has taught us that.

Q: The health care overhaul turned into health insurance reform last year. Was that misguided or does your industry need some serious repair?

A: You'd have a hard time finding people in our industry who would tell you it didn't need some major structural changes.

I mean health care itself. All the participants have a role in fixing this, and at the end of the day the bill basically focused on health insurance.

Essentially we're moving the chairs around on the deck of the Titanic. Health care costs are still out of control, and the disruption in the market with all this chair moving is going to be pretty noisy over the next handful of years. I think it's unfortunate.

It was maybe a well-intentioned effort with some good outcomes and a lot of unintended consequences yet to be seen.

Q: What would be the key element to change about the federal overhaul?

A: It's loaded up with taxes across the entire thing, and you've got to ask yourself if you're trying to get health insurance costs down for people why would taxing the very benefits that they have help? The answer is it won't. (The health care overhaul that President Obama signed last spring aims to cover millions of uninsured people and plans to fund this, in part, with taxes on health insurance and reduced payments for Medicare Advantage plans).

Q: You've lasted much longer than the average Fortune 500 CEO. How much longer will you stick around?

A: I don't really know. I think retirement is on the horizon, but it's on the horizon. It's not real close.