Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod: anger and healthcare. A wide-ranging and personal conversation with health insurance executive Mark Bertolini. The provision of healthcare, the actual investment in people's health, has changed dramatically while the insurance industry hasn't, and the way we buy healthcare hasn't. He led Aetna and now leads Oscar Health, and he's got a vision for an improved American health system. What would you do? What I would do is I would eliminate employer-sponsored insurance. You say that and it stops my heart a little bit. How Bertolini views his own security in the wake of the UnitedHealthcare CEO murder, and how his own chronic pain wore him down for 18 years. I just couldn't do it anymore. I was exhausted. That important conversation today. Plus, in the markets, Tesla's helping nudge Elon Musk toward a milestone. He will be a trillionaire. He could be. He could be the first. And one New Jersey congressman was born to run, so he says. Springsteen, it kind of crosses party lines. It's Thursday, December 12th, 2024. Squawk Pod begins right now.
Good morning, everybody, and welcome to Squawk Box right here on CNBC. We are live from the Nasdaq MarketSite in Times Square. I'm Becky Quick, along with Joe Kernen and Andrew Ross Sorkin. Tesla climbing now to a record high during yesterday's session, rising by nearly 6%. The stock now up 70% since Donald Trump won the November election. You're looking at it at 426.35 right now. Yesterday's move lifting it above its previous closing high from November of 2021. And the move in Tesla was lucrative, as you'd imagine, for Elon Musk, and also coincided with a big jump in valuation for SpaceX this week. Bloomberg estimating his net worth right now surging above $400 billion. It's almost surreal, with a one-day gain of $62.8 billion. As of yesterday's close, his fortune's estimated at $447 billion.
It's hard to even think of that when a lot of it has to do with equity. I mean, that doubles. It's not ridiculous that it could double in the next five years. And he will be a trillionaire. He could be the first. His money now, I think even on an adjusted basis, is more than Rockefeller or Carnegie or anyone would have. Yeah, even a Jusser. I don't think there's any other trillionaire, unless some of the aliens flying the drones. Some of them might be the ones in Jersey. Over Jersey, theoretically. I don't know whether they're... they're pretty nice drones. Yeah. Well, you know, we've always said on this planet, no one's worth a trillion. Well, we've always said that. Well, had Bill Gates held on to all of his shares, he would be a trillionaire today, remarkably. Yeah, that is remarkable.
President-elect Trump has invited Chinese President Xi Jinping to attend his inauguration next month. This is according to a CBS report citing multiple sources. I saw it yesterday. It's not clear, though, whether Xi accepted the invitation. And the report says inauguration officials are making plans for additional foreign dignitaries to attend. And meantime, there's this: President-elect Trump is scheduled to ring the opening bell at the New York Stock Exchange this morning. And an Associated Press report, this we kind of figured, this says he was a finalist. Say, who else would it be? Was named Time Magazine's Person of the Year. Time declined to confirm the selection ahead of this morning's announcement. I guess, I think the cat's out of the bag on that story.
I think so. And it's, I guess, it's the one time we might say the word 'Time' in reference to the magazine per year where they might actually have a scintilla of relevance. We talk about them sometime with their most influential lists, their 100 most influential. Maybe, I guess, their lists. It's sad. That's what they've been relegated to. Used to be a real news magazine. Industry has been very difficult. Tough business it is. Has our newspapers. I wonder what picture they use. Well, they use, maybe they'll get a picture of him with ringing the bell. I don't know. I was wondering if that would be the, you know, after he was shot with a bullet. Fight, fight, fight. Fight, shot. Yeah, that's so iconic, right? Maybe so. I did try and get him on today. I spoke to him and he, I don't know, said stop by. I mean, you're coming from Trump Tower, it's on the way. You could stop by here. He go, I got a car full of people. I mean, it would be the Secret Service. You know, that's a loaded term now. They, oh yeah, go ahead, don't worry. No, but they, well, Mr. President, if you're watching and you happen to want to stop by, just drop. Probably going down Seventh, aren't you? I think he'd probably go down Fifth. Fifth, I would think, yeah. Fifth from Trump Tower. But you can cut over. Mr. President, you can cut over 143rd Street here and we got food. I think they clear the way. We do. I'm sure we'll get some. I know we could get, we do have some food out there. No, we don't. Is that anything good? No, there's nothing in there. You know, we should get some sausage and Egg McMuffins. You think that would work for him and me? Okay.
The U.S. appeals court now ruling that Nasdaq could not impose rules designed to increase diversity in corporate America by requiring listed companies to have women and minority directors on their boards or explain why they don't. Now, it's an interesting ruling. It was 9 to 8. It was a New Orleans-based appeals court found that the rules approved by the SEC ran afoul of federal securities laws. The SEC said it's reviewing the decision. Nasdaq said that it believed its rules would benefit companies and investors, but that it respected the court's decision and, interestingly, said they would not appeal. And we've talked to Adena Friedman a lot about the original decision. Of course, the original decision was aimed at requiring disclosure about the diversity of the board. You didn't have to do anything in particular, but if you didn't have a diverse board, if you will, you had to disclose and explain to some degree why and what was happening. And of course, this all came in the aftermath. I don't know, it was in the aftermath of, but this was back in sort of the 2020 era when ESG and a lot of the things we've talked about, and now there's a sort of obviously big backlash to have come back. There was backlash from a lot of companies who were irritated by this. And when there was talk of the Texas setup of a competing, yeah, competing exchange in Texas, there were companies who were saying, look, we're tired of getting harassed about this. We're tired of the expectations on this. And the idea of a competing exchange in Texas was one that a lot of companies internally were talking about. As I remember, we had a conversation with Harty in Davos. I think we also had a conversation with David Solomon. Remember, they had made efforts to diversify their board. I mean, there has been this move afoot, but clearly the move is going the opposite direction now.
I thought this was going to, we were going to talk about New Jersey Congressman Josh Gottheimer. I thought he was going to tell us what was going on with the drones. Well, we should try that too. I really did. But he admitted yesterday that he faked his Spotify Wrapped list that he shared online. The list summarizes each user's top played songs for the year. Gottheimer posted a list that made it appear that his most played songs were all by Bruce Springsteen. But online sleuths pointed out that the font, the numerals, and the spacing looked a little bit off. Gottheimer, paraphrasing Springsteen, said he created the list for fun, so just relax. He said he shares an account with his children and the playlist he posted was a reflection of what his would look like if he did have an individual account. Gottheimer is running for governor in... I'm glad that got cleared up. This was big news. The funny thing is he then posted his real one and it had Drake, it had Taylor Swift in the top five. He said, yeah, those are my kids.
I have, I don't know, I'm like my father. Turn my bigger Spotify problem. I don't know if you share your Spotify account with family. We have a family account, but sometimes if you ever have it where you're playing it somewhere and then all of a sudden it stops, I think some of our viewers will understand what's going on because they're playing it somewhere else, right? And then you're having a competition with... I do that with Matt. I keep trying to over-press play to override them and then they're trying to override you. Why you do need the family account because you can't technically, if they're under their own account name, it should be fine. But of course they... I do this with Matt where it's like, no, no, I'm not listening to heavy metal. I've switched around so much and I have favorites on SiriusXM. I'm tired of it. And I have settled on just Real Jazz. It's called Real Jazz. I think it's 67. Leave it on. But I'm, you know, people that are riding with me are like, yeah, you know, loser. So apparently on Gottheimer's account, the Boss was in the top spot. It was followed by Billy Joel, Drake, Travis Scott, and Taylor Swift. He's like, yeah, Drake, Travis Scott, Taylor Swift, those are my kids, basically what he was saying. I think that'd be my bottom spot. I know I live in New Jersey, but that's just me. Miles would be my top spot. Springsteen kind of crosses party lines. Oh, I'm not saying it has anything to do with party. I just never... I remember he was on the cover of Newsweek and Time back in the 70s the same week. It was weird. I said, was that with the bandana in the back pocket? When he was on the... I guess so. It was after Born to Run. That's like, I don't... I'm not a fan, but whatever.
A bipartisan group of lawmakers are threatening to break up some of the nation's biggest healthcare conglomerates, including UnitedHealth and CVS Health. A new bill introduced yesterday by prominent Republican and Democratic lawmakers would prohibit companies that own drug middlemen or health insurers from owning pharmacy businesses. So that means the pharmacy benefit managers would not be allowed to be owned by pharmacy companies. That bill is co-sponsored by Democratic Senator Elizabeth Warren and Republican Senator Josh Hawley. There is a companion bill that's being introduced in the House. But again, this is the right and the left teaming up to go after what we've been anticipating could be a problem, the PBMs. That was something that President Trump mentioned in his interview with Meet the Press just this past weekend as being an area that they would be looking into as well. We're going to be talking to Mark Bertolini. He served as Aetna CEO until that insurer was acquired by CVS. He's now the CEO of Oscar Health, which is a much smaller insurance company. We're going to talk to him about what he's seen over the years, what he thinks might be done, where the problems are, and how you deal with the public furor that has broken out after UnitedHealth and the killing of that CEO. It does kind of seem like there should be an arm's length between the pharmaceutical manufacturers and the PBMs, doesn't it?
Well, the, this is the pharmacies and PBMs. Yeah. And the PBMs will blame the drug companies, the drug companies blame the PBMs, everybody blames the hospitals, and everyone involved blames the insurance companies. It's a pretty tangled and complicated system. There's not an easy answer. We're not going to get an answer with Mark Bertolini in the 10, 15 minutes that we get to talk to him about, but he has some deep insights. He does, and some what would be wrenching, like that the employer... I hate his, I hate his thing that he's employer-funded model is broken and can't work. But we all sort of count... you'd have to, you'd have to, I'm not, I don't do things by myself. You'd have to be a self-starter and know exactly how to do it individually so that your plan goes with you. And you know, Robert Johnson wants that for retirement plans. We, employer-funded, you know, parts of your life have been a part of all. The issue is employer-funded healthcare has tended to be better healthcare because you have the bulk of an employer who can go and negotiate on a bulk basis for you. Or if you're not employed, if you're not employed, it's trouble. Well, look, we get our insurance changed here pretty regularly. We are facing, we're going to be joining UnitedHealthcare from Blue Shield come January at this company. So just being at an employer-sponsored healthcare does not keep you in the same plan for forever either. But I think there is some advantage to having an employer who has a lot of employees negotiating for you rather than trying to navigate it by yourself. And this takes me back to Obamacare where they said, if you like your plan, you can keep it. Or not true. You know, we'll get into this. Mark's got some really deep insights into this. He's going to put his finger on some of the problems as you're an individual trying to navigate this system. It's incredibly complicated. Bertolini has so many fixes to Obamacare that it's almost a repeal and replace. It's not quite, but there's so many things that need to be... send him into the White House with Trump and they can figure it out together, figure out how to do it.
Tea will be next up next on Squawk Pod. A candid, wide-ranging discussion with veteran health insurance executive Mark Bertolini. His take on his personal security, his ideas to improve our complicated Byzantine insurance system, and how he managed nearly two decades of chronic pain. I was like, wait, 18 years and it was my brain all this time. His physical and mental battles to change his life. Now I'm pain-free a year and a half later. And the care that finally helped. The right side of my brain now works. I have empathy. I cry at stupid dog movies. That conversation right after this break. Springsteen kind of crosses party lines.
This is Squawk Pod. You're watching Squawk Box on CNBC. I'm Andrew Ross Sorkin, along with Joe Kernen and Becky Quick. Earlier this week, an Ivy League-educated man in his mid-20s became the prime suspect in the murder of a healthcare executive last week. In the aftermath of the killing, there's been an outpouring of much anger that's been targeted at the healthcare industry and at corporate America, making many wonder if this incident could change the way the healthcare insurance industry operates. Joining us right now with his expert insights is Mark Bertolini. He's the CEO of Oscar Health. He's also the former chairman and CEO of Aetna, among a lot of other different positions that he's held in the healthcare industry. And Mark, want to thank you very much for being here.
It's great to be here. Thank you, Becky.
You are somebody who has so many insights into how the healthcare industry works, and I know you've got some big thoughts about what should change. You've been thinking about this for a long time. We've talked to you for many years about these things, but obviously there's an amount of attention that's being put on this in the public and in Washington, and there might be a real opportunity for change. Just wonder, first of all, what you think about what you've been hearing back from the public and the anger over denials and where we stand at this point. I mean, it's kind of crazy that we've gotten to this point.
Well, I think the anger is justified. You can't talk to anyone in this city and not get a story about a claim denial or a prior authorization, which, talking with some of the people outside, you know, getting the right drugs, whatever. And I think what's happened is the provision of healthcare, the actual investment in people's health, has changed dramatically while the insurance industry hasn't, and the way we buy healthcare hasn't. 80 years ago, we created this employer-sponsored system because we were trying to offset inflation. So no wage increases, but we could offer benefits at the same time. There's this expected population explosion, and then we had the Hill-Burton Act in the '50s that built hospitals everywhere. And so we created both demand and supply increases that have not slowed since the population boom happened. And all of this costs. I mean, if you look at the percentage of GDP going to healthcare, it's now just under 20%, and in 1984 it was 9%. So as you look at these changes over time, we've just outrun our ability to afford the way we do it. There are questions about whether we get appropriate outcomes for the amount that we are spending on it. I would argue that since 1984, healthcare has gotten better for the vast majority of Americans, but it still falls short. It falls short of expectations when you're talking about spending 20% of GDP and life expectancy's gone down.
Is it lifestyle or is it... I mean, the healthcare is better and we have the best technology and healthcare in the world. But if 50% of the population is going to be obese, you're running into a buzz saw. There's no healthcare that is going to be great enough to handle the lifestyle problem.
Your ZIP code matters more than your genetic code in your health. So how you live and where you live actually matters. And so we have huge issues in rural communities around the country. But probably the most important thing is that healthcare has now become very individualistic. I want it to be fit for me. And when my employer buys my healthcare coverage, they buy for the average.
So what would you do? I mean, look, Elon Musk was out there just earlier this week, we were talking about it yesterday, suggesting that the answer is if we could get a huge percentage of Americans on GLP-1s, we could bring the cost down of healthcare in a remarkable way, especially if you could get the price of GLP-1s to come down in a remarkable way. What would you do?
What I would do is I would eliminate employer-sponsored insurance.
You say that and it stops my heart a little bit because those of us who have employer healthcare think, oh my gosh, getting thrown in... so everybody's dealing with Medicare Advantage, that seems like a pretty terrible thing. And I would argue that my healthcare insurance, while I'm not always thrilled with it, at least I have an employer who can go and argue for the mass of us. There's a lot of us and that at least has some bulk. If I'm out there on my own, it feels like there wouldn't be any protection that comes with it.
The ability of your employer to negotiate against a large insurance company that has a much larger relationship with the provider community is very stinted now. You can't do it now. And you're saying the companies have no leverage. The companies have no leverage now. Interesting. And you look at the basic foundation of our economy, which is small business and middle market, they have none. And they're seeing double-digit rate increases when just over in the individual market, our trend's been three and a half percent each year.
Why do... but do the claims get turned down more readily in the individual market than they do...
So it's the same. Our denial rate's less than... it's 12% is our denial rate. UnitedHealthcare, I've seen 23 to 33%. Yep. And the only one that's lower than we are is Kaiser, because they don't do it. And Kaiser doesn't do it because the physicians are taught to practice in a certain way with one another. Right. So they know how to refer within the system and to the right people. But here's what we hear. We hear things like AI systems being put in place at UnitedHealthcare that are turning down claims and overruling doctors that are requesting it.
I've heard Aetna, where you used to be the CEO, that there were health claims officials who testified that, oh yeah, we turned down, we denied people's requests without even seeing their medical records at times. I mean, it's that much of a system where doctors will complain that they have to hire multiple people just to sit online to get through to insurance companies to then be turned down.
What we've known for more than 20 years in the insurance industry is that the large majority of prior authorizations that we do always get done anyway. But yet we make everybody go through the hoops. And the reason is, again, employers buy for the average of their employee population. They buy large networks because their employees use a lot of providers. And as a result, the ability to negotiate a better rate with that provider group is a lot less because you got everybody in. But when you get narrow networks, which is what's happening in the individual market, and you have everybody in, an individual can find their network. They don't have to rely on their employer to build the network.
Does it mean that as an individual, if I'm really healthy and young, I can get a much better premium, but if I'm somebody who has a family and is using the healthcare system, I'm going to be paying a lot more?
So here's how you have to think about it. You have to think about the employer giving to employees what they've traditionally given them for benefits. It's defined contribution instead of defined benefit. You allow that employee, with some assistance to understand what's going on in their use of healthcare, to get them into the right plan.
Here's the question that I'm worried about. I'm worried that unfortunately, parts of this country are not necessarily fully financially literate. This is a very complex, Byzantine situation. I was telling Joe just yesterday that I broke my toe. I broke my pinky toe, which I don't think should be that big a deal. You should be able to wrap it and that should be the end of it. But it hasn't gotten better. So I went to a doctor, that was a couple hundred, and they said, well, you need to go get an x-ray, that's a couple hundred. And they wanted to get something called an Exogen machine, that's like $4,000, and they want you to come back. And this is for the pinky toe that I can just chop it off maybe. But my only point is, the whole thing is a little bit of a crazy situation. Yes. And I'm able to do that and blessed to afford to be able to go back. And for maybe I shouldn't be doing it, frankly. But I don't know if everybody out there is going to do it the right way and is going to figure out how they're supposed to handle their own healthcare.
So everybody is doing it individually when they're with their doctor, not when they buy their health plan. But when you buy your health plan in the individual market, 94% of the people that choose a plan choose it with a broker who sits down with them and talks about what they need. And when that happens, you now get a plan that works for you versus getting the employer's average plan, which in a lot of cases may make you over-insured. You're paying for more than you're actually getting.
Well, but what you're talking about is if you need insurance, you're going to pay a ton of money. If you don't need any insurance, you're not going to pay a lot. And that is a little frightening because you don't know when you might end up in the position to need it.
A large number of people that have zero premium plans with us have a silver-based plan, which is a good plan in the ACA, and they hardly ever use it. And why do they buy it? They buy it so they don't lose the house if they get in an accident or they get really hurt. So people have different needs for insurance. And so what we need to do is we need to allow that greater freedom of choice. Our most sought-after plan in Oscar is a plan for diabetics, because we actually bring them in, get them into care, and get them under control, and they end up in a better place.
You've talked about that when you were at Aetna too, trying to do preventative care to help keep people from the big things. I guess when I think about healthcare insurance, I think about people who have paid in their whole life, think they're getting insurance, they finally put on a claim for cancer or something else, and they get denied. And what you're talking about sounds like, okay, you're going to be paying very high premiums if you ever use us. If you don't use us, you're fine. But that sounds like what people are mad about right now.
No, you don't pay very high premiums when you're in the largest risk pool in America today, which is the ACA. It's 23 million lives. It's the most stable risk pool in America because what we do at the end of the year is we actually level the risk across all the plans. We're a net payer at Oscar. We pay over a billion dollars into the pool every year because other payers have negative numbers. And so we level it all out. So we're all at the same place from the standpoint of risk adjustment. It's not like Medicare where everybody's competing on their own for risk adjustment. We level it out and at the end, that creates stability in pricing and stability in trend.
Two issues. First of all, the pharmacy benefit managers are under attack in Washington. You saw this legislation that Elizabeth Warren and Josh Hawley have put together. This is the right and the left, a Republican and a Democrat, saying they should not be allowed to be owned by a company that also owns a pharmacy company. That they want to break things down. I mean, you sold Aetna into CVS, and part of that buildup was a huge part of consolidation. What do you think about consolidation at this point? What do you think about being too big? What do you think about the pharmacy benefit managers?
