Aetna's decision to pay actuarially sound capitation rates to California physicians appears to be a significant breakthrough in resolving the strife that has marked relations between medical groups and health plans in California.
But defining what actuarially sound is--and who gets to determine the final definition--could present a serious hurdle in the effort by Aetna and the California Medical Association to make peace.
Getting the two sides to even speak on the same terms already poses challenges.
"We always felt we paid actuarially sound rates," says Howard Arkans, M.D., Aetna's regional medical director for the western region. "We're still committed to paying actuarially sound rates."
Not so, says Kenneth Hoffer, M.D., an ophthalmologist and president of the Los Angeles County Medical Association. The rates led to the demise of physicians' practices and hospitals, he says.
"Actuarially sound means . . . that there are the funds to (cover a program), if you're going to promise healthcare, that what you charge is adequate to what the actual health expenses are going to be," Hoffer says. "If the amount the insurance company charges for a policy is not sufficient enough to warrant them to pay the hospitals and physicians what a reasonable fee is to cover their costs, then it wasn't actuarially sound.
"If they're trying to cut the hospital fees, there's two reasons: One, they're trying to increase their profits. Or two, they haven't collected enough money. Then it wasn't actuarially sound."
Aetna's Dec. 19 announcement was accompanied by a statement outlining plans to drop the all-products clause nationwide. Aetna previously had dropped the all-products clause in several states, including Connecticut, Georgia and Virginia.
The CMA and Aetna developed a separate handbook on areas in which they want to work together. Among the other changes: Aetna will pay the cost and administration fees for new children's vaccines, pay the cost of new technology on a fee-for-service basis and create a liaison group to resolve continuing issues.
A vocal critic of insurers and managed care plans in particular, the CMA gave cautious approval to Aetna's announcement. With that approval, however, CMA officials say they reserve the right to file lawsuits or bring proposals to the California Legislature to address concerns.
It's the decision to pay actuarially sound rates that has physicians talking. Defining actuarially sound may be akin to Supreme Court Justice Potter Stewart's oft-quoted definition of obscenity: No concrete definition is available, but you know it when you see it. As it stood before, physicians were paid based on rates set by the health plans. Physicians could negotiate for better rates with health plans but weren't always successful.
Actuarially sound capitation rates can vary depending on the covered population, Arkans says. If one group of people requires more care, those actuarially sound rates will be higher than for a healthy population.
"That has to be included," he says. "Part of the work group is sitting down and going through what this means. Hopefully by getting together, they'll have a better understanding of how rates are determined. We'll have a better understanding what their concerns are. The outcome should be positive."
Arkans says the group will use Aetna's actuaries. He says that actuarially sound isn't a one-size-fits-all category.
"Twenty-nine dollars to one group may be great, and $45 to another may be awful," he says.
CMA officials didn't return phone calls seeking comment.
But Hoffer says most physicians are pleased with the decision-so far.
"It showed some accommodations to the terrible situations physicians have been in for the last 10 to 15 years," Hoffer says. "I think there's a general hope that a company as large as Aetna has looked at these problems over the last
several years and this looks to be reasonable. I don't think every (insurer) is going to (follow suit).
"We don't look at this as a cure-all and end-all to the problems, by any means. It's at least an acknowledgment."
Aetna and CMA accordIn agreement with the California Medical Association, Aetna will:
- Pay actuarially sound capitation rates
- Pay the cost and administration fee on a fee-for-service basis of new children's vaccines
- Eliminate the all-products clause
- Stop forcing doctors to take on the insurance risk for the cost of patients' prescription medicines
- Pay for new technology on a fee-for-service basis
- Create a CMA/Aetna liaison group to discuss and try to resolve issues