The president of 2,000-employee Anthem Blue Cross and Blue Shield of Ohio faces new entries in the health insurance marketplace using cutthroat pricing to get a foothold and competition from the very hospitals and doctors that are service providers to his health plans. On the other side, his customers want more in exchange for the ever-increasing premium dollars they’re doling out.
Slater isn’t facing much that his counterparts at other health plans aren’t confronting; the difference is that instead of simply relying on grabbing membership, Anthem is using innovative methods to control costs, especially among its most costly cases. While Slater sees a place and potential for cost-paring schemes such as health savings accounts and high-deductible plans, they’re no panacea, he says.
“There’s more to it than offering high-deductible health plans and giving people options and educating them,” Slater says. “There’s a whole segment of very, very sick people you’re not going to reach with those things.”
He says helping the sickest members many of whom have chronic conditions control their illnesses can reduce overall costs more effectively. Far from a pie-in-the-sky proposal, Anthem has demonstrated that intensive case management efforts and other measures can, indeed, reduce costs while delivering quality care.
Slater spoke with Smart Business about being in the market for the long haul, where the costs are and the opportunities to reduce them, and the tough choices ahead.
How do you manage an organization that interfaces with customers and providers of every size?
I pay a lot of attention to the people and the numbers. At my level, I can’t sit in on every meeting, I can’t make every decision, so I spend a lot of time on having a very qualified team of people who report to me.
The difference between our model versus the competitors’ is that any decision in the state of Ohio can be made by me. I don’t have to go to underwriters in Minneapolis or Hartford or anywhere else. I have the absolute full authority, where with some of my competitors ... the underwriting is done in another state, and they make the decisions for every state.
What that allows me to do is pay close attention to all the things that are going on in the state from a membership standpoint, a competitive standpoint, etc. I go meet with customers, I meet with the large brokers, and I can be very flexible and adapt from quarter to quarter. I think the local decision-making is a big difference. In all of our states, there’s someone whose butt is on the line.
How do you compete in an environment where your potential customers and your competitors range from the very small to the very large?
In the long run, you’ve got to do it based on a high level of quality, a high level of service, fair initial costs. The small group is going to buy rates.
You’ve got to have competitive rates but you’ve got to be consistent in your renewals. Probably 90 percent of what we write is through a broker intermediary, and we’ve done a good job with the brokers in giving them value and consistency.
Today, you have Aetna, who has not been in the market the last four of five years, probably being somewhat irrational as they buy into it. They’re anywhere from 10 percent to 20 percent below me or United around the state, and I can’t go there.
Let them have that business, and once they raise their rates, be there to take it back.
What are your customers demanding from you?
The No. 1 thing is, what are you doing to control costs? They want two- and three-year rate guarantees if the can get them. Cost is the No. 1 driver.
Because they’re paying, be they the employer or the member who’s paying through a higher deductible or the member who’s paying through a higher salary deduction, they expect more and more for these higher levels. So the service standard that we have to attain and we’re willing to do are much higher and much different.
People want it now, and they expect it to be perfect and they expect to talk with someone live. Online services, there’s a certain segment that wants them, but quite honestly, we see a lot of people get it online, then turn around and call to verify it.
Customers are looking to me to control costs, provide a high level of service and in the plan design, they want multiple options. There is no one plan design that meets everybody’s needs, so they’re looking to me to provide multiple options that are structured to supply two, three or four levels of their employees.
They’re paying for it, they think they deserve it.
What are you doing to rein in costs?
We’ve got to eliminate all the redundancy we can. We can’t duplicate efforts that our providers and brokers make. We truly have to become easier to do business with, and that’s become a focal point over the last couple of years.
For years, we internally said we’re doing a good job, based on our standards, but what did the customer want and what did the provider think? So we’ve made some huge inroads with the doctors, with the hospitals as to (determining what) they think about what we’re doing, what we do that irks them, what doesn’t fit with their systems, timely payments to them, accurate payments to them, reconciliation payments to them
We’re trying to work with them online, give direct access to specialized people when they have questions. We have to leverage our size with the providers, (and) at the same time have a partnership with them. It can’t be a one-way street. We have to be predictable. I have to be able to go to my customers and say, this is what I expect costs to be over the next couple of years. That’s been a strength for us. We haven’t gotten into the buy low and then raise prices. We’ve been fairly consistent with our renewals for about a four-year period.
Is consumer-directed health care becoming a more important factor in the Ohio market?
It is, but it’s not the be-all, end-all. If I put in higher deductible plans and I educate people to be better consumers of health care, those people who don’t have high claims, they’re going to take a higher deductible, they work out, eat better, have a healthy lifestyle, that’s wonderful; they get to pay less.
But the fact is, 5 percent of the insured generate 55 percent of the claims, and 17 percent generate 78 percent of the claims. Putting in high deductibles for the healthy people really doesn’t change the net cost of a program. We’ve got to take responsibility at the insurance company level, at the provider level, at the government level; we’ve got to have partnerships where we really work at helping these people.
Many of them have multiple chronic conditions, and they’re not going to go away. Don’t misunderstand me. We have to have lots of those kinds of programs, HSAs, HRAs and high deductible health plans, just to compete in the market. What we’re looking at, really, is improved case management, how to help these people, because they’re the ones with the claims.
What are you doing to cut costs among that segment of your membership?
We just completed a pilot program in two places in Ohio. I don’t have the exact numbers, but I think for every dollar we spent, we recouped about $5.
We found people who weren’t taking their medications because they couldn’t afford the co-pay under their employer’s plan. So we applied for some of the Medicaid programs, went to some of the drug companies that have a generic equivalent and worked with their doctors to take away the dispense-as-written order to substitute something very close.
Maybe a pharmacy company has a specialized deal for low-income people. We have lots of little programs like that. We have a pharmacy and therapeutics committee. It’s a two-pronged committee.
One group focuses on drug equivalency, efficacy of the drugs, etc. We have another one that’s made up of all professionals, non-Anthem people, that look at the first group’s findings and determines what we should be offering in our formularies. That group determines that there are certain drugs that have no equivalents and it is critical that people have access to it.
The therapy committee might say, go ahead and negotiate the best price, the best deal possible for it. If they make a recommendation, they take it back to the first committee and the two groups talk about it to see if they can agree.
We do not want to practice medicine, and so we’re trying to put products and programs out there that the providers can support as a result of their recommendations. We leverage our size so that we can buy at the lowest wholesale we can, we leverage ourselves with the large pharmacies to try to set the lowest cost with regard to distribution and dispensing fees.
We’ve started a program, and it’s shown huge savings with regard to what’s being imaged, what setting and where. If you’re going to have it, we’re going to suggest three or four locations in a given area where you’re going to get significant savings if you go there.
How will costs be controlled going forward?
The case managers of the future have to be very proactive nurses who are calling these people and saying, ‘Have you been taking your medicine?’ They have to run data through our systems, looking for contraindications on drugs many of these people are seeing two or maybe three specialists making sure that they’re going to the optimal place for treatment versus a local hospital, when the procedure has to be done to maximize the outcome.
We have to take a much more aggressive role in helping these sick people through the system.
How to reach: Anthem Blue Cross Blue Shield of Ohio, a division of Wellpoint Inc., www.wellpoint.com