Tennessee's top health insurer talks about ObamaCare, consolidation and company growth

Dr. J.D. Hickey moved to the corner office of BlueCross BlueShield of Tennessee (BCBST) on Sept. 1, taking the reins of a company that is navigating change in nearly every aspect of its industry.

Hickey is tasked with running Tennessee's biggest health insurer at a time when reforms, and consumer demand, are reshaping the way nearly everyone pays for - and accesses - health care and insurance coverage.

The Affordable Care Act set out to reform much of the health care landscape. The impact on health insurers is immense. The companies sell more directly to members while trying to work with providers to keep medical costs down.

The challenges to insurance, be it managing costs, talking to newly empowered consumers or thinking about balancing premiums with access to care, make headlines. For Tennesseans the changes add fear to an issue that, for many, is already complex.

"Health coverage is a kitchen table issue for many people. We touch people the best and worst times in their lives," Hickey said. "You make these changes and you will have an impact."

Traditionally, the bulk of BlueCross members in Tennessee came from employer-sponsored plans. That is changing. The Chattanooga-based company insures more than 3.3 million people, nearly one-third from what it calls its retail book, which includes the federally run health insurance exchange, Medicare Advantage and a program that allows TennCare members to choose from three managed care organizations.

It's a health insurance era marked by rapid change. The company is "blessed with pretty much every national competitor" as it tries to attract consumers to increasing numbers of retail products, Hickey said.

In the broader health insurance space, there are massive proposed mergers as insurers look for cost savings and efficiency. Hickey said the 70-year history as an independent Blues plan in Tennessee is a strength that differentiates it from national insurers.

It recently had to re-earn one of its top five accounts, which had plans with both BlueCross of Tennessee and a national competitor. BlueCross in Tennessee won not only its account but the account from its competitor as well.

"When we asked them afterward what was the difference, there were a few big things," Hickey said. "One was when they had an issue, when they had a priority, we were there. We were there in an hour, and it's not a regional representative who is going to go pass something back. It's me. It's Dr. (Andrea) Willis (chief medical officer) if it's a medical issue."

Hickey, 44, who holds dual medical and law degrees from Duke University, succeeded Bill Gracey, the 61-year-old former hospital executive after working directly under Gracey during the former CEO's nearly three years as the company's head. He says the transition has been a smooth one, and he is eager to stay the course as an independent insurer competing for business across all of Tennessee

Q. You've been in the top job for a couple of months. What's your day to day?

A. I'm still getting my arms around it, to be clear. I try to focus my attention on the four to five things that I can most be impactful for. A big one of those is team building and team dynamics. I'm a fairly big believer that it takes deliberate day-to-day energy to create a sort of connected, coordinated team that is functioning at a high level.

It's no surprise. Any CEO gets pulled into the biggest priorities of their team, and a whole bunch of my time is spent in and around the individual market right now. That's a market that is still very much in flux as seen by the news (that the state's cooperative provider, Community Health Alliance, has shut down). It's frankly changing so fast that a fair amount of my time and energy goes there.

Q. There could be about 600,000 Tennesseans eligible to buy plans on the exchange, which is now in its third open enrollment, particularly with the ending of BCBST's grandfathered and grandmothered plans. What are you thinking about this enrollment season?

A. This is a market we're deeply committed to making work. I think we've got the broadest presence. We went in early, we went in all the counties. We tried to cover all the metallic levels. Anybody that has been anywhere near this market over the (past) few years realizes it has not been smooth. I think the combination of legal, political, operational challenges has been quite severe, and all you've got to do is spend a few hours on one of our call lines - it's still difficult.

People call in with something that should be straightforward like changing a wrong date of birth - something that would take literally less than five minutes on any of our other products - (and it) will require multiple calls both to us and the federal call center and a couple of hours to change. It's a new program. We're still front and center, and a bunch of changes can only be made by federal call centers. It makes our average call centers' time and stats on the marketplace lines fundamentally longer and more challenging than the rest of our business.

At the same time it's getting better. People are getting more familiar with the products.

Q. How is the market changing for consumers?

A. A whole lot of choice is now left to the individual, which I think is increasingly the way health care decisions are going to be made. It does put the onus on individuals to make sure they get educated.

On a macro level, we view ourselves as playing a key role in helping keep cost control, or medical inflation, under control, or to at least a manageable level. At the same time, how do you manage that against making sure people have access to the care that they need? Those will be difficult. You only make those decisions when you feel like you can still put an attractive product out into the market that has great alternatives in the same community that has, at least, good, if not better, outcomes and cost profiles.

But no, that's tough. That's absolutely tough. What you see here is, increasingly, individuals want more access to control, their own health experience and expenditures. A whole lot of our investments are in things like consumer tools to try to increase the transparency both from quality and cost perspective to help individuals try to make healthy choices.

Q. What opportunities are you looking at?

A. Maybe not all of our customers are aware that we are fundamentally changing the way we reimburse providers for care in Medicare Advantage, where we made a big strategic push three years ago. We've been very pleased with the growth of that program. We've grown faster than each of our competitors combined over the last two years. Every physician is reimbursed to quality outcomes and overall cost management. Within 18 months, hopefully that will be true of 100 percent of our commercial physician network as well.

Q. The health insurance industry appears to be consolidating as Anthem tries to buy Cigna and Aetna plans to buy Humana. Is BlueCross and BlueShield of Tennessee going to stay independent, or is it going to go the way of many other insurers and be a party in a merger?

There is a long, proud history of being a high-performing, single-state Blues plan (that is a) mission driven, tax paying not-for-profit.

We've also been one of the highest-growing and some of the most positive margins in the system as well. We're not just doing well, but we've been doing even better over the last few years. That's in the face of what we would acknowledge as increasingly formidable competition.

I, personally, am very much wedded to our independence as a Blues plan. We are all about Tennessee. I think one of the things I bring to the role is a deep appreciation for what our employees can do. We have been part of some really big successes since I've been here, and if I think about going head to head against any of our growing competition, even though some of them are literally 10-times larger than us, I'd stack our team up against any of them.

I'd put our employee base and our model up against anybody out there. I think we're very much proud of what we have. We attribute a whole lot of that to the fact that we're local and independent. We plan to stay that way.

Q. You were recruited to Tennessee by then Gov. Phil Bredesen to help assess and ultimately revamp the state's Medicaid program known as TennCare. What lessons did you learn from running the Bureau of TennCare in Nashville that you bring to your new job at BlueCross in Chattanooga?

A. These are unbelievably complicated and large programs. If you take your eye off the ball, you lose control of them very fast. It just takes a lot of day-to-day discipline and tough choices. We were part of very difficult choices during my stay (cutting the TennCare rolls by about 166,000 persons). But I look back at it with immense pride to be able to be associated with a team that is still there after we had had so much turnover in the TennCare bureau in the past. That program really is a gold benchmark program for how you run a competitive managed care program to manage long term care.

Our program at BlueCross, known as BlueCare, has been with TennCare from its start two decades ago. We've always been the stable, cooperative partner in the system. What we are especially proud of now is that we've won the best MCO (managed care operator) program for the past two years. The program did struggle for a while, but we're proud abut how it is doing now. about hos it is doing now."

Q. Last year, the health exchange plans you offered for individuals under the Affordable Care Act, or ObamaCare, lost $141 million for your company and you've said there were be comparable losses this year. You are raising rates in 2016 by 36.2 percent to help avoid future losses. What lessons have you learned from your experience with health exchanges?

A. I think that we have been able to have such a compelling product and achieved such a high share of the market (with 70 percent or more of ACA subscribers signing up with BlueCross in Tennessee) is a big deal for us and shows we have been successful in attracting consumers to our plans.On the pricing, we simply got it wrong and we've had to make some large changes (in rates) to try to bring our rates more in line with our medical costs. We're not the only ones who are losing money on these accounts and are now requiring large rate increases to stabilize these markets.

Q. You've said that cost-containment is one of the biggest desires for your customers. As a company, are you looking to cut staff and operating expenses to help reduce or hold down rate increases?

A. The good news is that our top line enrollment grew 5 percent this year, which among our top competitors puts us at the top of the list in terms of the percentage growth rate. We've also grown our staff by several hundred people as we meet the demands of the market. Our campus here (on Cameron Hill) is full, but we have more than 1,000 telecommuters now and increasingly more of our hires are now working from home. We believe there's lots more room to grow in our state and we're now servicing other Blue Plans in other states in meaningful ways, which is another great growth opportunity for us to allow our staff to diversity our revenue."

Times Free Press Business Editor Dave Flessner contributed to this report