Blue Cross and Blue Shield benefiting from ACA

Insurer's Georgia president says Affordable Care Act, state health plan prompted local hiring surge and new office building

tadams@ledger-enquirer.comMarch 9, 2014 

Home to roughly 1,800 Blue Cross and Blue Shield of Georgia employees already, Columbus is well-positioned to add even more as the Affordable Care Act continues to roll out and the insurer's parent firm consolidates operations.

That was a key message from Blue Cross and Blue Shield of Georgia President Morgan Kendrick during an interview Thursday at the Ledger-Enquirer.

With three weeks left until a mandatory health-care insurance enrollment deadline -- the final day is March 31 -- the executive also confided that the launch of the federal program known as ACA has been a learning experience for insurance companies and consumers alike.

"I feel like you could almost make an analogy that 2014 was a complete shot in the dark, and one light bulb is on for 2015, because you've seen a little bit about how the market behaves," said Kendrick. "But it's probably not until we get into 2016 and 2017 do we have some adequate volumes to really understand what this new world looks like."

Kendrick oversees about 4,000 Blue Cross employees statewide, with its major operations hubs in Atlanta, Columbus and Savannah, Ga. The company insures about 2.9 million Georgians in all 159 of the state's counties, with the insured number expected to grow because of ACA and the addition of a State Health Benefit Plan, which covers Georgia workers, retirees and teachers. The latter, which launched Jan. 1, added more than 640,000 individuals, with Blue Cross administering their health benefits.

In fact, Kendrick said, it was the extra business that prompted Blue Cross and Blue Shield's parent company, Indianapolis-based WellPoint Inc., to approve the relocation of the 1,800 Columbus staffers to a 235,000-square-foot office building to be constructed in Muscogee Technology Park in the Midland area of the city.

Work should begin this summer, he said, with plans calling for Blue Cross employees to vacate a longtime complex on Warm Springs Road in Columbus, as well as a currently leased structure in Muscogee Technology Park, for the new office.

The capital investment for the new building will be about $50 million, Kendrick said, with Blue Cross now seeking a developer to build the structure, partially offsetting the costs by having the developer take possession of the Warm Springs Road complex that dates to 1958.

"I do know that's part of our bid process," he said. "We would like to fold in the disposition or acquisition of that property as part of the developer bid into the new one, so that we could have a turnkey disposition of one (building), move into another, consolidate our work forces, and move forward productively."

Kendrick, an Auburn University graduate who has been with the insurer nearly two decades, also touched on other topics. Here are snapshots of what he had to say:

Changing health-care world

We do believe that over time there's going to be a marked shift to more of a consumer-oriented health-care market than an employer-driven health-care market. I certainly don't think it's going to happen right away. We saw this with the retirement business, when you went from a defined benefit (pension) to a contribution strategy (ala 401(k)). … I don't see that it will be terribly different from property and casualty or auto insurance. It's sometime in the future. We've got a ways to get there. Certainly, the higher end of the market -- the larger employers -- will be the last to follow in that realm.

ACA launch was 'bit clunky'

It has not been seamless and it has not been as easy as we would have liked. I think everything that we heard in the press about what happened on Oct. 1, when the exchanges opened, or healthcare.gov opened, it was a bit clunky. Things weren't ready, the website was a bit shallow as far as how it connected and how people could enroll.

So I think we had a little bit of a missed opportunity and, of course, the game changed quite a bit towards the end of the year. We expected that to a large degree; we knew there were going to be changes as we moved along.

Moving forward to manage costs

Almost 3 million Georgians are expecting us to figure this out and come up with a solution. To me, health care is too expensive. People can't afford it. So (it's about) what are we going to do to drive more affordable solutions to the market.

Holding on to old medical policies

We had a great deal of our business that elected to grandfather and keep what they had. Certainly, when you look at the market before health-care reform and the market where we are today, the products are a bit different, the networks are a bit different.

So (Blue Cross policyholders) that had the old products, perhaps those who aren't subsidy eligible, really liked what they had and wanted to hang onto it. This (recent federal extension through 2016) allows them another 36 months to do that. Of course, my thought is if you don't like what's happening today, just hold for a minute, there will be a change forthcoming.

No forced policy cancellations?

We have not. We gave probably three or four direct attempts for people to retain what they had. We extended and allowed those in the individual market to give us notice up to Dec. 15 to keep them for Jan. 1, and small groups until Dec. 6, so we pushed that way out. Those that did not elect to keep what they had, we did transition them to an ACA-compliant product. That to me is not canceling a product.

Topping 100,000 exchange enrollees

I can tell you Georgia has seen slightly north of 100,000 (health-care) exchange participants. We still will get numbers through the end of this month.

Our enrollment is somewhere in the 15 percent range, which is kind of where we expected. We did not expect to make a heavy play in the beginning with the exchanges. The intent was to be in the exchanges, offer our products, offer our services.

Opt out penalty a 'bit weak'

I believe the ($95) penalty's a bit weak in the way it's structured. I think others do as well. We've heard it nationally, speaking of the enrollment, that it is trending older than expected. Of course, the older population, the sicker population, will be the ones most in need of new coverage.

The good news, I believe, for Blue Cross and Blue Shield, is that we contemplated some of these. They're a bit older than we contemplated, nonetheless our pricing is adequate, we believe, to cover the population that we're seeing come in.

The original penalties are rather light at $95 on an annual basis. That's certainly not a big incentive, but that's a start.

Younger policyholders critical

Over time you're going to need to have a balanced risk pool. If you have an older, sicker population, of course, that's not going to mathematically work to solve the problem that we're out here to do. The intent is to get more people into the system to spread the risk and have a balanced pool of sick individuals, the needy individuals, and those that are healthy and well.

Columbus workers processing state health plan

That's a terrific win for us. … We hired 900 people, opened a brand new building here in Columbus out in Midland, put brand new technology into that building, and all of it came up seamlessly and flawlessly.

We took the extra measured steps in going to outside consultants to validate the claims processing and things of that nature. All of it has gone very well. So our relationship with the state is exceptionally solid from my perspective. All of the feedback that we've received has been positive.

Don't lose that five-year state contract

Columbus is a big, big piece of that. We've had big growth. We've got a big capital investment coming into this market with our new building, which we hope to break ground on in August of this year.

I certainly understand I have no "right" to the business. We serve at the pleasure of our customer, and it's my intent to hold this business much longer than five years. In fact, we supported the state for 32 years prior to us losing (the contract) in 2009.

It's my job to make sure that we continue to hone our assets and that we deliver value for the state and, if that's indeed the case, I expect us to have this for many, many years, which indeed does benefit the Columbus market.

Constructing the new office

I'm meeting with our corporate real estate folks this Friday to sort of talk through the bid process. We had a competitive bid process where many vendors submitted proposals for the work, and those were delivered two weeks ago. I'm expecting to hear some feedback as a result of that bid process and the next steps going forward.

I know it's a very compressed timeline to name a vendor, a notice of award, and then move forward, breaking ground this summer and being in that building sometime in the summer of '15.

What happens to Warm Springs Road complex

The building is in perfect shape inside. There are no windows, which makes it less attractive for others. But it's certainly a prime piece of real estate there. And there's certainly opportunities for lots of different people to use the facility or use the space for whatever they so choose. … We don't have any plans to raze the building.

Columbus could have lost the expansion

This is not just a Blue Cross and Blue Shield of Georgia facility. WellPoint Inc. owns Blue Cross and Blue Shield of Georgia, and we're the second-largest health care company in America and we operate 14 different (Blue Cross) companies, all of which have operation centers in them.

So we had the opportunity to look at Nevada or California or Colorado or any of the Midwestern markets, as well as New England or Virginia.

Columbus has always done very well from an efficiency perspective, from a cost perspective for us, and a quality perspective. Unlike this year, we have very few snow days typically in this market, so it's a very financially advantageous market for us. … We also saw what a talented, progressive, productive workforce we had here, and how many individuals we had seeking employment in this market. It played very well.

So when you look at efficiency and quality, Columbus sort of rose to the top and made the cut for WellPoint to make this big investment. … We're in the position where we're actually paying claims for our other Blue Cross companies within the WellPoint umbrella, and as we look at consolidating operations sites, which you have to do in the new world to be more and more efficient, it certainly makes sense that (Columbus) could indeed be an area for additional growth.

… In fact our health-insurance exchange business for all 14 states under WellPoint is served here in Columbus. So when you look at the exchange work, whether it's an exchange member in New York or Virginia or Connecticut or Indianapolis, those calls are being taken in Columbus.

A glitch-free ACA in two to three years

Glitch free? No. I do think it's a terrific part of a shift in our health-care delivery model across America, and sort of being right in the bulls-eye of it is exciting.

So when we 20 or 30 years from now sit back and retire, we can say as this business shifted, we were part of it.

I think we've got a terrific health-care model here in America, and I do believe it's going to change. There's going to be more government subsidies into the equation of health care for individuals and this will, in my opinion, get better over time.

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