The president of Kentucky’s largest health insurer discusses the industry’s challenging search for efficiency
By Ed Lane
Ed Lane: Prior to becoming president of Anthem Blue Cross and Blue Shield of Kentucky in 2006, you were the vice president of group sales for the company. How long have you been working in the healthcare industry?
Deborah Moessner: I’ve been in the healthcare industry for over 28 years. It’s been a wonderful profession in which to be involved; I have thoroughly enjoyed my career. I was vice president of sales prior to coming into this job, and I’ve had the opportunity of serving in many different market segment capacities. It’s been a great ride so far.
EL: During your career, you have witnessed difficult times for the health insurance industry. What two periods were the most difficult from your perspective?
DM: Certainly, we’re going through very challenging times today. As I look back on my career, I’d have to say the most difficult time was when the Kentucky General Assembly passed House Bill 250 (in 1994). Healthcare insurers were faced with dramatic reform and had to offer guaranteed-issue policies with no pre-existing conditions or medical underwritings. Sixty insurance companies left Kentucky, so the competitive environment changed dramatically within the individual market coverage. When customers are guaranteed coverage and can purchase a policy at any point in time, that can create a serious imbalance in an insurer’s risk pool and really drive prices up. Now health insurers nationwide are faced with the recently enacted federal healthcare reform bill that contains similar coverage provisions.
A ‘guaranteed coverage’ parallel might be someone deciding to buy homeowners insurance when their house is already on fire. The basic principle of insurance is to spread the risk over a large group of people so that prices can be maintained at an affordable level. That ultimately leads to access for more people.
EL: One of your significant issues was negotiating fees with a major Louisville healthcare provider in 2009. Could you address that situation?
DM: Anytime Anthem’s negotiations with a large hospital or provider system ultimately lead to a disruption in our network, it’s a trying time. Anthem certainly understands that healthcare is very personal. So we take those situations extremely seriously and do everything we can in the best interest of our members, customers and clients. At the end of the day, we are really negotiating on behalf of our clients. Our job is to deliver affordable products, provide access and to fairly reimbursement our providers. Anthem always tries to deliver a balanced, broad network of affordable healthcare providers for its insured clients.
[There are] 126 hospitals in Kentucky are under contract with Anthem. The vast majority of the time, these contracts are negotiated without any fanfare or disruptions.
That was the first time Anthem went through any hospital disruption in Kentucky, so it’s a very rare situation. We worked it all out in a fair and equitable manner.
EL: What is the future outlook for your industry under the new ObamaCare legislation (HB3590, Patient Protection and Affordability Act)?
DM: First of all, the Patient Protection and Affordability Act (PPAA) is certainly the law of the land, and Anthem is focused on the implementation of the various provisions of the law. Many teams within our company are fully engaged in making sure that Anthem meets expectations and is compliant with the law.
Our management understands that addressing rising medical costs is at the heart of the problem. I think everyone would agree that our system is not perfect; there are certainly opportunities for improvement.
Anthem has already implemented some provisions of the law that went into effect in 2010. A couple of examples are: coverage of dependents up to age 26 and the elimination of lifetime maximums on benefits.
When Anthem is required to include certain benefits within its plans, it does have an effect on cost. The mandates Anthem is required to provide at this point will cost its clients anywhere between 1 and 3 percent (more).
Another example of a new requirement (effective in 2011) is the minimum loss ratio that ranges between 80 percent for small businesses and individuals, up to 85 percent for larger employers. That rule will require Anthem to spend 80-85 cents of every premium dollar collected on medical services. Anthem is looking for ways to continue to gain efficiencies and work within these new parameters.
Down the road there’s more to come. The whole idea of healthcare exchanges are in the process of being discussed right now and will come into play in 2014.
EL: How would universal coverage as mandated in HB3590 impact Anthem’s operations in Kentucky?
DM: The law does include a mandate that by 2014 everyone will purchase coverage, whether that’s through their employer, the open market, or through healthcare exchanges. Right now the law requires everyone in 2014 to purchase coverage or be assessed a penalty. The penalty continues to increase after 2014 and will force folks to either purchase healthcare coverage or decide to pay the higher penalty. With a guaranteed-issue policy, an individual has no need to purchase a policy until they become sick.
Anthem anticipates that 30 million uninsured people will enter the ranks of the insured through the expansion of Medicaid and other provisions that are in place. But universal coverage mandates will remain elusive. Several million people in the country will likely remain uninsured – off the grid in some way, shape or form. While there will be tremendous expansion, the goal to have universal coverage is almost impossible to achieve.
EL: If an individual pays the non-insured penalty, but then – when ill – buys insurance, how will Anthem manage this actuarially?
DM: It remains to be seen exactly how individuals will react to the universal insurance mandate. A mandate with a substantial penalty is going to encourage people to purchase the coverage. As I said before, a large balanced pool of insured persons will drive affordability. But we don’t exactly know what behaviors are going to be in response to PPAA.
EL: HB3590 has been ruled both constitutional and unconstitutional in the last month by U.S. District Courts. The contrary rulings will be appealed to the U.S. Supreme Court. How will the legal proceedings affect Anthem’s future plans in Kentucky?
DM: Right now PPAA is the law of the land, and Anthem is focused on making sure it meets its obligations by implementing the various provisions as they become effective.
Obviously, Anthem can’t completely ignore the litigation, but it’s not changing its approach of remaining very focused on business at hand – making sure Anthem meets the provisions of the law as stated.
One of the hopes of the federal healthcare reform legislation is that competition will increase and drive prices down. While that’s possible in some cases, there may be unintended consequences.
EL: How large are Anthem’s operations in Kentucky?
DM: Anthem Blue Cross and Blue Shield of Kentucky is part of WellPoint Inc. (WLP – NYSE) the largest healthcare insurer in the country by membership. It covers 33 million Americans through 14 Blue Cross and Blue Shield plans. One of WellPoint’s differentiating factors is a national presence that is highly focused on its local markets. Healthcare is delivered locally.
I get up every single day and my focus is on Kentucky. I understand the dynamics of this market, and my job is to make sure Anthem is meeting the needs of its customers. And that we ultimately grow our business here in Kentucky.
Anthem has over 1.2 million policy holders in Kentucky. It is the largest health insurer in the state. The company also offers life, dental, vision and disability (coverage) even though the core business is medical insurance. Operating under the name Anthem Blue Cross and Blue Shield of Kentucky, all of our specialty products are part of our suite of products and fall under Anthem. Many employers like the idea of one-stop shopping and utilizing one company for all their various benefit programs.
Anthem has 1,200 employees in Kentucky. Most of our employees are very focused on business operations in Kentucky. To gain efficiencies in many of our locations, Anthem’s state offices may administer components of our healthcare business for multiple states. That’s how WellPoint enhances the efficiencies of its overall operations.
EL: Major healthcare providers – UofL, UK, Norton, Jewish/St. Mary’s and the Catholic Health Initiative – are teaming up as partners or members of alliances to provide statewide medical care services. How will this impact Anthem?
DM: What we are seeing in Kentucky in terms of partnerships, alliances, collaborations and mergers, etc., is very similar to what is happening around the country with many healthcare providers. Providers are looking for ways to better coordinate care for the patient. You may have heard the buzzword ‘ACO’ or ‘Accountable Care Organizations.’
There’s a big movement to go in that direction, and I think ultimately the industry will come up with more cost-effective and quality-oriented approaches to coordinate certain types of healthcare.
Some interesting statistics: One in every five Medicare patients is re-admitted into the hospital within 30 days of discharge. Nearly half of those never saw a doctor for follow-up care (in the interim). If there’s a way healthcare providers can pull together and operate less independently, then I think the outcomes are going to be very good for patients and the whole system. That’s the goal of an ACO.
EL: A lot of critics comment on insurance companies’ overhead costs in comparison with those of Medicare. Why is Anthem’s overhead higher than Medicare’s?
DM: Anthem is always looking for ways to control costs that have a direct relationship to the premiums for the plans it offers. Better medical outcomes help drive a lower cost of care at the end of the day.
Medicare is strictly a claims paying organization and can be pretty administratively efficient if that’s all it does. In order to be competitive, the private market has to offer more services than just paying a person’s claim when they submit it.
EL: Do you see standardized databases as a good service to aid your customers?
DM: It’s really interesting when you think about consumers and healthcare, and relate that to other purchases. Anytime a patient can have access to information and make better decisions about healthcare options, at the end of the day that’s good.
We have a tool called Anthem Care Comparison. It provides our members with the ability to go out and look at information. I think there are 59 medical procedures that can be queried in order to compare costs. There is a dramatic variance in what can be charged for a particular procedure in one city versus another. So this tool really allows someone to evaluate variables in terms of cost and make better informed decisions.
EL: Recently you’ve taken on an additional role with the Kentucky State Chamber of Commerce. What does that involve?
DM: I’m serving as chair of the Kentucky Chamber. I became chair in October after serving four years on the board. (President/CEO) Dave Adkisson is an extremely strong leader, and he and his staff have been wonderful to work with. The board is made up of business executives from across Kentucky. The chamber’s membership is made up of a broad array of businesses, and it’s a great opportunity and honor for me to serve.
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One-On-One: Deb Moessner
The president of Kentucky’s largest health insurer discusses the industry’s challenging search for efficiency