Florida leads the nation again for the number of people signing up for individual health insurance as required by the Affordable Care Act — Obamacare. Over the first five weeks of open enrollment in the fall, 600,000 Floridians signed up. Twice as many are expected to eventually sign up once all of the enrollment periods expire on Sunday. Signing up by then gets coverage beginning March 1.
Health insurance company Florida Blue expects to sign up 250,000 new customers for individual plans in 2016. Including patients re-enrolling, Florida Blue plans to cover 600,000 patients with its Affordable Care Act health insurance business. That gives the company a commanding presence in Florida’s health insurance industry with 30 percent of the market.
WLRN’s Sunshine Economy spoke with Pat Geraghty, chairman and CEO of Florida Blue and its parent company GuideWell, last month:
Q. How would you describe this open-enrollment season compared to the previous two?
Never miss a local story.
A. This open-enrollment season is interesting because we’ve got a number of different players making different statements. We’ve heard from United HealthCare that it’s thinking about exiting the marketplace. We’ve heard that CIGNA is considering the same strategy. We are staying the course at Florida Blue. We are actively involved statewide in all 67 counties and in all product levels. We expect to have a strong open-enrollment period this year.
Q. Do you measure that by the number of new enrollees or the number of repeat enrollees?
A. In both areas, we expect to grow our enrollment. We expect to do a good job of retaining the people who we currently have enrolled. Our [premium] rate increase across the state is about 8 1/2 percent, which is better than almost all of our competition. We’re seeing the ability to control costs in an effective way, and we think that is resonating with our existing customers as well as people that we are going out and recruiting.
Q. An 8 percent [premium] price increase for 2016 compares to almost twice that for 2015.
A. The rate increase is down significantly this year. I think we did the right thing by pricing last year. I think we’re also seeing that we are getting the kind of effect that we all hoped for by bringing people into coverage who previously didn’t have coverage. That was an important change for folks because it gets them into regular care as opposed to all of the pent-up demand that people have when they’re not covered. We’re seeing chronic care conditions that are down from 2015 compared to 2014. We’re also seeing fewer emergency room visits. We’re getting people to the right level of service. We think that that is a good indication that over time, we can make this population healthier.
Q. As you mentioned, some of your competitors in Florida have seen [their profit outlooks] cut because of their Affordable Care Act exposure. How has Florida Blue been able to navigate this?
A. I think there are two things at work here. One is that our competitors, for the most part, are publicly traded companies, and they have to solve for Wall Street. They have to produce returns that satisfy their investors. We’re a not-for-profit mutual insurance company. That means that we don’t have to solve for Wall Street. We set our prices to produce a return that’s in the 2 to 3 percent range. We’re looking at investing back into our product and back into our organization for the benefit of the people who have our coverage. Another distinct difference is we’re the largest player. So with a population in the Affordable Care Act enrollment that’s now well over 400,000 people, we have a mix of risk in our population. By having a sizable population, you have a better sense of what your cost is going to be one year to the next. I think we are in a better position than our competition.
Q. Is health insurance under the Affordable Care Act a business that in the future is not to be played by for-profit health insurance carriers?
A. I can’t predict for them how they intend to play. I can say for us that we think it’s important for us to solve this issue because our mission is to help people and communities achieve better health across our entire state. Our goal is to serve as many people in Florida as we possibly can. Florida is our primary focus. A lot of the other people we’re playing against in this health insurance game are coming from other states, and so they can pick and choose whether they play in Florida or play in part of Florida. We’re committed to the state. We’re committed to the people that we serve in this state.
Q. If these for-profit competitors reduce exposure in Florida or eliminate coverage in Florida, doesn’t that provide less competition?
A. Ultimately, that could provide less price competition, but I can tell you right now, Florida is a highly competitive marketplace. We look at it as one of the most competitive marketplaces in the nation. It’s hard to project what that looks like in the future. I think it’s important, though, to understand that in a competitive marketplace, it’s important that there be competition in all parts of the market. What do I mean when I say that? We focused on an awful lot in this discussion over the last few years around competition between health plans. I think it’s also important to understand that there needs to be competition on the delivery-of-care side of the equation because what we’ve seen across the country is, if the marketplace for delivery of healthcare consolidates around single players, they get to control the price. You could have 10 health plans, but if you’ve got one hospital in that community and they buy the physician groups, they set the price. So it doesn’t matter how many competing health plans you have. It’s important that we have balance. We have competition in all parts of the marketplace to the benefit of the consumer.
Q. What are you experiencing in terms of premium price and plan selection for returning Obamacare customers and for new customers in the marketplace?
A. This market is very price-sensitive — whether it’s existing or new customers. It’s extraordinarily price-sensitive. The important part for us is that we create value for that customer, and that we have transparency to the customer, so they understand what they’re purchasing — not just the benefit level, but also understanding who is in the delivery system as they make that purchase. We’ve built retail centers across the state. Four of those are in South Florida alone. That was a real effort on our part to connect to the consumer, to be transparent, to give people a place where they can actually sit down in a thoughtful way and understand all the nuance of our product as well as be able to have customer service delivered there after [purchasing a plan]. You see the difference in the way we’ve approached this from where our competitors are. We believe the partnerships that we create with physician groups and with the hospitals that we’re working with are very critical to create value and a focus on value. That’s why our reimbursement models are shifting from pure fee-for-service to really paying for better outcomes. When we create those kinds of arrangements, we’re presenting back to a customer a cost that is more affordable to them, has a higher emphasis on quality and outcomes, and has the opportunity to maintain that cost into the future. I think that’s what you’re seeing with our renewal pricing this year.
Q. You mean a slowing down of the year-over-year increases in the premiums that healthcare customers pay?
A. Absolutely. It’s all on a relative basis. Obviously, with the aging population and with an obesity epidemic, we’re all challenged to keep that cost as low as possible and as affordable to the consumer as we possibly can make it.
Q. When you describe this marketplace in Florida as “very competitive,” at [what types of medallion levels] are customers congregating?
A. From the inquiries that people are interested in keeping their cost in line. People will shift to lower-benefit plans to help that cost. They’ll shift to plans that have tighter networks as opposed to wide-open networks. We’ve seen a lot of interest in that. I should highlight there that in the past phase of managed care when you had tighter networks, there was a lot of pushback that we got from the marketplace. That came from the employer making the choice. They were deciding that for all of their employees. You’re now talking about individual choice and selection. Each of us as consumers make those tradeoffs every day. If you have a choice between a ranges of products, and there are some products that have a narrower network but they include people that you’re willing and comfortable to see for your care, you may make that price-value tradeoff and you take the tighter network because it’s your choice. It’s not somebody else’s choice. We do see that as a driver in the marketplace.
Q. How did you approach limited networks vs. open networks?
A. I think it’s modified. Listen, when we first started the first year, we weren’t quite sure what to expect. We had hundreds and hundreds of plan offerings. What we found was that was too confusing to the consumer. You say people want choice, but if you give them unlimited choice, people glaze over and say, ‘Well, I don’t know what to do.’ So we narrowed significantly from all of the choices that we had out there to a more standardized group of offerings. Some have lower deductibles than others. They all have wellness and the ability to visit physicians at pretty low costs because those are the kinds of things we want to encourage. We want people to have care. We want people to access that particular physical exam or that wellness check. There are other plans where the deductibles are higher because people are trying to keep their premiums down. If you combine a higher deductible plan with a tighter network, then you can have the lowest possible cost. We were trying to make sure we were constructing options based on consumers’ interest [and] ability to pay.
You’ll also note that in South Florida, in particular, we have some new ventures like medical clinics with the Sanitas organization out of South America. We now have medical clinics that are GuideWell clinics and Sanitas. We’ve opened three of those clinics during this open enrollment period to be very focused on taking care of people in sort of a one-stop-shopping kind of way. There’s a broad range of services at those clinics. We found a lot of interest in them
Q. Has that also been a Florida Blue response to third-party costs that you felt were getting out of line with what you thought the marketplace could sustain?
A. I think that’s a fair observation. If you think about the price of the health plan, there’s only a small piece of that that is the administrative cost related to what the insurers are doing.
Q. That’s limited to 15 percent.
A. Correct — 15 percent in the small group and 20 percent in the individual market. The lion’s share of the cost — 80 to 85 percent of the cost — being on the care the individual is getting. If we’re going to be scrutinized and held accountable for the price of the premium, it makes sense for us to have a bigger stake on the other side of the equation. The Tampa market, we reached an arrangement with a diagnostic clinic where we now own that medical clinic. We have different arrangements depending upon the marketplace and what we think the right opportunity is.
Q. How a consumer can look at Florida Blue is changing. The company is not just the pass-through of the risk of an individual’s health but also now the delivery of the healthcare itself.
A. That’s exactly right, and it’s not just the consumer that can see it. We’re also finding that the hospitals that we approach are interested in partnering because they’ve seen that we’ve made a real commitment to keeping people healthy in the first place.
Q. You mean partnering beyond a healthcare provider that has a contract of prices that Florida Blue is willing to pay on behalf of an insured [patient]?
A. Yeah. I’m talking about an arrangement where the contract moves from just being a fee-for-service arrangement to where there are incentives for value creating the best outcomes. If you think about that in your delivery system, you want to be partnering with a health plan that actually has a stake in the equation with you and doesn’t just say, ‘We want to have a contractual arrangement and you bear all the risk.’ If you think about our membership, they have the opportunity to go to our retail centers. They have the opportunity to interface with some of our medical groups. They have our wellness programs if they’re through an employer. We have lots of things in place to help our membership stay well in the first place, which is an important part when you’re thinking about the overall cost or population management that an institution may be looking at.
Q. Could you see an opportunity for Florida Blue to have an owned-and-operated healthcare facility beyond a diagnostic center or a primary-care center?
A. Certainly there’s discussion of that in the marketplace, and I have to tell you my answer is absolutely not. We have no interest in owning hospitals. I think people ought to do what they do. I think you draw some lines about where you might blur that, but for me, no. Florida has well over 200 hospitals statewide. You’re talking about huge capital commitments. That’s not anyplace that we want to be. We want to partner with the people who already do that work, and let them do it more effectively and efficiently.
Q. Is owning facilities coming back into the plans that allow Florida Blue to limit plans to those partnered facilities?
A. Not at the scale we’re at currently. I think there’ll be opportunities to look at that over time. But certainly, there’s an opportunity for us to understand that level of the delivery system and create best practices with those facilities that we actually export to others that we work with. Florida is a big place. There are a lot of people to serve and to cover. I think there are plenty of opportunities for us to be in very positive partnerships in the marketplace.
Q. How much of this is a response to the consolidation you’ve seen in some markets? How much of it is a response to Florida Blue trying to control its exposure even further?
A. We’ve been on this trail now for a couple of years, so recent consolidation does not play a role in what we we’re doing. This is a strategic plan that we’ve been working for the last few years. However, I think it emphasizes that we’re on the right path. As others consolidate, it makes sense for us to be making sure we’ve developed the partnerships so that we can deliver for our customers.
Q. Does that development extend into doctors’ groups or specialty groups?
A. Yes, absolutely. The diagnostic clinic in Tampa is not just primary [care]. It has specialty services that are offered. We certainly are interested and capable of playing in a variety of spaces. We want to do that in combination with our partners in the various marketplaces that we’re in. This is a large enough market. There’s enough that can be done collectively and collaboratively
Q. Do you anticipate expanding into owning and operating healthcare facilities could continue to reduce the number of plans that Florida Blue would offer in a marketplace in the future?
A. I think you’ll see a range of options, and the ones that will be most cost-effective will be the plans that feature the tighter networks where the most strategic relationships exist.
Q. The tighter networks that would include Florida Blue. Strategic networks are what you’re saying.
A. Yes, correct.
Q. How could the healthcare consumer respond to that?
A. I think the healthcare consumer has been very positive. We’ve seen a product that we have called My Blue featuring these tighter networks be very warmly received. We see that people understand the cost-value equation. They see representation of providers of care that they’re comfortable with. So we think we’re going to see a lot of enrollment in that product.
Q. You’ve mentioned that transparency is something Florida Blue is interested in, in terms of premiums. Florida Gov. Rick Scott, who is a former healthcare executive himself, has called for healthcare-transparency efforts on the part of hospitals. Scott said recently that he wants to put prices up “on a menu board, just like Starbucks or anything else.” Is this something that you can get behind conceptually or in a real significant way?
A. I understand the issue around transparency. Consumers in all walks of life want to understand the cost. I think it’s going to be important that as this area evolves that we can see both the cost and the quality metrics so you understand that you’re not just buying the lowest possible price. You’re buying low price with strong outcomes. It’s not always so black and white around the quality issue, and the health providers themselves are evolving how to measure for quality outcomes. I think the two of them together give the consumer transparency, and anybody who’s fighting consumer transparency is on the wrong side of the equation.
Q. So how does this manifest itself for Florida Blue, a company that provides insurance coverage for the healthcare consumers? This is how much you pay every month, and this is the coverage you get, and here’s your deductibles, and here’s your co-pays. And then separately, Florida Blue negotiates a price list with healthcare providers about how much you’re willing to pay for medical care.
A. One of the ways it manifests for us is that we have an application called “Know Before You Go.” We actually teach people how to use that app in our retail centers. You can go online and enter service that you’re looking to get in a particular geographic area. We can help you with understanding what your financial obligation is and help you with understanding what the range of cost is in the market.
Q. Have you found that’s the transparency that customers want? They don’t want to know the real price. [Rather] they want to know just what their out-of-pocket [cost] is going to be?
A. I think there’s a mix. I think the No. 1 thing consumers want to know is what their obligation is. I think there are people who want to understand the full story. I think over time, there’s going to be more and more opportunity to have the full picture of a bill.
Q. How does that full picture develop for Florida Blue, for you to still be able to provide a business model that works for you?
A. I’ve seen it in other states, so it’s not like we’re reinventing the wheel here. There are states that have databases that show people the range of cost and quality based on the results that are happening in the marketplace — whether that would be a statewide repository or whether that will be done by the individual companies. I think the state of Florida will migrate toward one of those transparent models.
Q. These are usually called “all payer claims databases.” They show how much the patient pays, what the discount was, and what the health-insurance provider picks up.
A. There are other models that are out there as well where plans have voluntarily put information into a third-party organization who does a transparency model and people can look up data. I think at the end of the day, you need to be able to provide to consumers information so that they understand what their cost options are [and] what the outcome options are in their marketplace. One of the challenges will be that as you move away from fee-for-service, the cost becomes a little less clear because it’s not just the per-transaction basis. It becomes a little more challenging to give a very specific cost for specific service. If it were simple, it would have been done a while ago. This stuff is fairly complex.
Q. In the governor’s budget, he has proposed $5 million for an all payer claims database. Is this push toward an all payer claims database something Florida Blue can support?
A. I don’t think you’d find us opposing it. We think that visibility to cost is an important place to be. The devil is always in the details around these arrangements. And so conceptually, that’s a good idea, but you want to make sure that if your pricing is not on a fee-for-service basis, how would that be compared to something that is a fee-for service basis? That’s one of the devils here.
Q. What are some of the others as you look at this push toward more full transparency in Florida? Obviously, your data is a rich mine for Florida healthcare, with 30 percent of the individual market that Florida Blue has.
A. What I have seen in other states is the dreaded unintended consequences. What happened was in some places when price comparisons went out. the providers who were on the low end of the spectrum saw it as an opportunity to move to the higher prices that others were getting. So the database was intended to give consumers the visibility and the opportunity to put pressure on the market to come down [in prices]. In some places, it backfired.
Q. How would you construct it so that it could answer those concerns and yet still achieve greater healthcare price transparency?
A. I don’t think we have the time to resolve that on this particular time because it gets into a lot of detail. But I think the important thing here is to say that we would be interested in being a stakeholder, interested in working with the state on how to construct it.
Q. Have you had conversations with the governor’s office about this idea of constructing a database with Florida Blue’s representation?
A. I have not specifically had that conversation myself, but our team is actively involved in Tallahassee, and we discuss all the issues that touch healthcare, including pricing.
Q. What is the healthcare market developing into today, vs. three-four years ago?
A. What we see is that it is far more consumer-oriented. If you think about the Medicaid product where there is no employer in the mix or the Medicare marketplace, where there isn’t an employer in the mix, and now the Affordable Care Act marketplace which for the most part is not employer driven, you now have a much bigger stake of retail [buyers]. We still think the employer model is valuable. It’s here to stay for a long time. But the change is the dynamic, when you now have virtually 50 percent of the people that we’re dealing with as individual consumers. So that retail nature is, I think, the biggest shift that we see in our business.
Q. You mentioned you continue to see a place for employer-based healthcare benefits. Do you see that continued space for small-company healthcare benefits? Are the small-employer health plans getting priced out?
A. It becomes a bigger challenge for small employers. I think it really talks about what [a company] wants to do in terms of recruiting employees. That’s where employers have always felt the value of their employee-benefit package. How they distinguish themselves in the marketplace for talent. That will continue to be the question that small employers have to answer for themselves. Is it a distinguishing element to recruiting and retaining talent?
Q. What have you seen, as far as that impact on the employer market?
A. We’ve seen the greatest impact in the small-employer part of the marketplace. A number of small employers have allowed their employees to go to the marketplace.
Q. So that means they have ended offering employer-based coverage?
A. Yes, but I would say at the same time, an important bipartisan decision was made in Washington, D.C., recently. That was to cap the [healthcare] exchange at 50. There had been a previous intention to go to 100 as the small-group level. The government isn’t sure how they would fund having employers up to 100 employees in the pool [for the ACA health insurance market] because it opens up the market to greater government subsidies. That’s a big fiscal issue. The government stepped away from expanding the small-group marketplace. They kept it at 50.
Q. What about any impact from ACA plans that Florida Blue has experienced on the medium- or larger-sized employer-based market?
A. That market has not really been affected significantly by the ACA. Everybody gets some impact, but substantially, that market has held together pretty solid.
Q. Why do you think that hasn’t found its way into the larger employer-provided healthcare market?
A. I think the larger market has been creative about their plan design. I think they’ve been effective in rolling out wellness and prevention programs. I think there’s a lot of the education that happens from the employer to the employees. I think lots of larger employers have made their workplaces healthier places. You see walk-at-work programs. You see healthier selections in their cafeterias. You see people who are conscious of their vending machines. You see a variety of things happening in that large employer marketplace to stem the tide of being open to all of the drivers that have previously existed.
Q. What about the Affordable Care Act would Florida Blue like to change?
A. If we were really trying to be affordable, then you would look at what are the things that are pushing up cost. One of the things pushing up cost is having a lot of taxes that are in the bill. We tax [medical] device manufacturers. We tax insurers. It’s kind of a misnomer to say we’ve taxed device manufacturers or we’ve taxed insurers because ultimately, the consumer bears that expense. The device manufacturers will pass on that cost. The insurer will pass on the insurer fee. To me, that’s completely misguided in terms of what we should be trying to do. We shouldn’t be raising costs and taxes when you’re trying to produce affordable care.
Q. How much do you think that adds to an annual premium or a monthly premium?
A. I think when you add it all together, the taxes collectively, it’s probably a 5 or 6 percent premium increase.
Position: Chairman and CEO of Florida Blue and its parent company GuideWell
Career before his current role: Before joining Florida Blue in 2011, Geraghty was president and CEO of Blue Cross and Blue Shield of Minnesota (BCBSMN) where he also served on its board of trustees and on the BCBSMN Foundation board.
Education: Bachelor of arts from Colgate University; has participated in executive education programs at Harvard University School of Public Health and the Wharton School at the University of Pennsylvania.
Connection to South Florida: Geraghty is often in South Florida for business, community and charitable events. He recently hosted the Florida Chapter of CEOs Against Cancer in Miami, a group he chairs. He has volunteered with a number of South Florida organizations including the Miami Rescue Mission, United Way of Miami-Dade, Branches, His House Children’s Home and the Miami Heat Foundation.
About Florida Blue & GuideWell: Florida Blue, Florida’s Blue Cross and Blue Shield company, is a leader in Florida’s healthcare industry. Driven by its mission to help people and communities achieve better health, Florida Blue has more than 4 million healthcare members across the state. An additional 15.5 million people in 16 states are served through its affiliated companies. Florida Blue is a subsidiary of GuideWell Mutual Holding Co., a not-for-profit, policyholder-owned, tax-paying mutual company. Headquartered in Jacksonville, Florida Blue is an independent licensee of the Blue Cross and Blue Shield Association, an association of independent Blue Cross and Blue Shield companies.
Listen to this interview at http://wlrn.org/post/insuring-health-sunshine-economy