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Humana CEO pitches plan to lower premiums

At a St. Petersburg gathering, he warns of skyrocketing health insurance premiums and proposes a solution.

By SCOTT BARANCIK
Published February 17, 2005

ST. PETERSBURG - Mike McCallister, whose company manages health-insurance policies for more than 350,000 private-sector workers in Florida, painted a vivid picture of the future Wednesday at a breakfast at the Salvador Dali Museum.

It was positively surreal.

If health insurance premiums continue to grow at an annual rate of about 12 percent, said McCallister, president and CEO of Humana Inc., they'll average more than $68,000 per worker by 2021. Such premiums will amount to about 63 percent of the average worker's total compensation, up from 19 percent in 2003.

Of course, that's assuming employers are still offering insurance in 2021. Business owners are eliminating insurance at a rate of more than a million jobs per year.

But McCallister didn't come all the way from company headquarters in Louisville, Ky., to give roughly 100 local executives and St. Petersburg Mayor Rick Baker a case of indigestion. He came to pitch his industry's latest last-ditch solution to soaring insurance premiums: "consumer driven" policies that reward workers who minimize their health-care spending.

"We've tried everything else," McCallister said.

He didn't arrive alone. As he did at recent Humana events in Chicago, Dallas, Houston and Nashville, McCallister brought along Monster.com CEO Jeff Taylor, who provided not only comic relief but also, as McCallister put it in an interview after the breakfast, an "edgy" role model known for "challenging the status quo." (Taylor was not part of a dinner Humana held for local insurance brokers Tuesday night.)

If edge means getting a roomful of executives to take off a shoe and thrust it high into the air or shout out, "To the Batmobile!" whenever they hear the words "new economy," Taylor had it. Whether he helped persuade them to try Humana's suite of Smart insurance products, however, remains to be seen.

But McCallister offered what he said is hard evidence that Humana's Smart suite of low-premium, high-deductible policies - most major health-insurance companies have their own competing version - really works.

One example is the company's own 13,000-member work force, which has been used to test its products since 2001. Another is the 116 companies that have been offering Humana's consumer policies for a year or more. On an annualized basis, their average costs have risen 4.6 percent, Humana says, far below the national average.

McCallister disagrees with critics who warn that some workers might neglect their health rather than pay a large deductible. (A deductible is the amount of out-of-pocket health-care costs a person must pay before his or her policy kicks in.)

"I don't think people are going to wait around and get sick just to save money," he said. He called such worries "fear-mongering."

At the same time, McCallister said, workers won't be the ones to lead the consumer-driven revolution; ask them what they want out of a health insurance plan and many will say they want maximum benefits - for free. That's because they have been shielded from the true costs of health care, he said.

McCallister added that it will be up to employers to prove to workers that compromise is necessary, as well as in their own best interest.

How can an industry that once called HMOs a silver bullet be trusted to have the right solution now? McCallister defended managed care, arguing that it institutionalized the idea of negotiating fixed prices with health-care providers, reduced hospital stays and cut back on frivolous use of expensive, high-tech medical equipment.

"We still sell HMO (policies) every day," he said. "Is that the model for fixing things? I think not."

[Last modified February 17, 2005, 01:20:09]