Jim Parker was an executive at Anthem Blue Cross and Blue Shield and WellPoint, both of Indianapolis, for 14 years, including a year and a half as chief of staff to CEO Angela Braly. He now is president of his own consulting firm, Meridian Strategic Advisors, in Indianapolis. He spoke about the impact of the new health reform law on health insurers.
IBJ: You ran the Anthem insurance plan in Maine for several years. If you had had to adhere to the requirements in the new national health law—guaranteed coverage regardless of pre-existing conditions, pricing based on community instead of individual health status, a minimum level of benefits, and a requirement to spend at least 80 percent of premiums on medical claims—would you have been able to make money?
A: The short answer is: probably. In the Maine market, insurers were required to give guaranteed coverage to any applicant. We were also required to do modified community rating. You could adjust your rates for a limited number of factors (e.g., age, geography). The biggest difference between this law and the Maine market is that, in the Maine market, there was no requirement that you purchase coverage. So what happens is that people who aren’t sick or for those for whom the premiums are on the brink of affordability, just drop out of the pool. In the individual market, those premiums would increase 10 [percent] to 20 percent every year. All of our competitors who previously offered coverage to that market left that market. So it wasn’t a good outcome. The reform law’s requirement for individuals to have coverage would overcome this problem. But the enforcement mechanisms may not be high enough to be effective. If the mandate proves to be effective and helps people stay insured, there’s a chance we can avoid many of the problems we experienced in Maine. But that’s still an "if."
IBJ: Massachusetts is three years into a law similar to the one President Obama just signed. It has been successful at achieving near-universal coverage and is popular with citizens. Yet costs have continued to spike, leading to a showdown between health insurers and the governor. Do you think Massachusetts is a good bellwether for national reform? Why or why not?
A: It very well could be. This national health reform, at its core, is insurance market reform, which really doesn’t do much to fundamentally change the picture with respect to health care costs. So in Massachusetts they enacted health care reform, which was principally health insurance reform. But they didn’t do much of anything at all to make the cost of care more affordable. I think what we’re seeing in Massachusetts is really worth paying attention to, because this could be precursor of what we see in many states. There will be a very real political interest to trying to stand in the way of insurance premium increases that the insurance industry will argue are necessary and actuarially justified. So you’re going to have a showdown.
IBJ: Many people have said the new health law is a big step, but one that will require much more work to reform the many problems in our health system. In your mind, what's the biggest thing needing to be done beyond the changes in this new law?
A: The largest remaining issue facing health care is how do we get our arms around the absolute growth [in cost] that’s taking place. Perhaps the solution’s out there, but we haven’t found one that’s politically viable. For better or worse, health care generally is such a politically focused and politically driven topic, that it’s a market that’s very difficult to correct without political involvement.