Florida insurer preps for Affordable Care Act

JACKSONVILLE, Fla. – Since Patrick J. Geraghty arrived here a year and a half ago as chairman and chief executive of the state's largest health insurer, Florida Blue, he has expanded its operations in government programs such as Medicare and Medicaid, entered new financial arrangements with hospitals and doctors, bought a medical group, invested in another and dabbled with a new private-sector marketplace that allows employees to choose plans from different insurance companies.

At the same time, he is preparing Florida Blue, a nonprofit Blue Cross and Blue Shield plan, for 2014, when most of the requirements of the federal Affordable Care Act go into effect.

Insurers will have to offer a policy to anyone who wants one, regardless of their health, and will not be allowed to charge more in premiums to people with expensive medical conditions. The plans the companies offer will be highly regulated through government-run exchanges that are still getting their final regulatory touches.

Insurance companies across the country, whether national for-profit players such as WellPoint and UnitedHealth Group or nonprofit Blue Cross plans in states like Arizona and Michigan, are undergoing radical change as a result. After years of focusing on selling plans to employers, rather than individual consumers, the insurers must alter course.

"It's like Yugoslavia, and Tito just died," said Dr. Kent Bottles, a physician and former hospital executive who is now a consultant. "The ACA disrupts their business model totally, and they're scrambling around." Geraghty, 53, who has worked in insurance for three decades, appears undaunted. He is tirelessly upbeat in talking about the opportunities, and challenges, facing Florida Blue. Since joining the company – he came to Florida from Minnesota, where he ran another nonprofit Blue Cross plan – he has held about 50 town hall meetings across the state to talk with employees about the future.

"We've got to be smart and to be quick," he said in an interview in his office on the eighth floor of a sprawling headquarters complex. "In the past, we've been slow and hanging out."

But the Affordable Care Act and the increasing pressure on the nation's health care system to become more efficient represent a major departure for insurers – particularly those, like Florida Blue, that have enjoyed leading positions within their states. Florida Blue has more than 4 million health plan customers, giving it some 30 percent of the state's insurance market and about $8 billion in annual revenue.

"No question, the pace and magnitude of change are immense," said Catherine P. Bessant, a Bank of America executive who is the lead director on Florida Blue's board. The goal, she said, is to make sure the insurer is positioned "not in a defensive crouch, but very much a foot-forward position."

Although some of its for-profit rivals have been diversifying their business into overseas ventures, such as Cigna, or related areas like health technology, like UnitedHealth and Aetna, Geraghty said Florida Blue remained committed to its core business, through insurance and new models of care.

"We know the margins in health care are shrinking," he said, referring to insurers' profitability going forward. "This is where we are."

Florida Blue was ahead of many of its competitors in seeing the need to appeal directly to the people it was covering. In 2006, it set up its first retail store, where people can shop for coverage, ask a question about a claim or see a nurse to check their blood pressure.

The company has 11 stores today and says it has sold tens of thousands of policies and established the locations as places where customers such as Mary Duke, who said she came to the Jacksonville store once a month, can ask the same representative questions about a bill.

"I don't like to handle these things on the phone," Duke said recently. "It is so much better face to face."

The new health care law also promises an expansion of Medicaid, although some Republican governors, like Florida's Rick Scott, have not yet decided whether to take the federal money because they worry about the long-term cost of enrolling more people.

Insurers, however, see the change as an opportunity for growth, especially since so many low-income people will move back and forth between the exchanges and Medicaid to find coverage. "There's a lot of maneuvering to get into the Medicaid space," said Jack A. Rovner, a Chicago lawyer who advises health care clients on the changing dynamics of the industry.

Some companies, such as WellPoint and Aetna, recently bought insurers specializing in the Medicaid market, and Florida Blue is partnering with AmeriHealth Mercy, a company affiliated with Blue Cross plans that specializes in Medicaid and operates in 14 states. The two recently invested in a provider network that focuses on low-income clients, and they are bidding with the group for a contract to manage some of the state's 3 million Medicaid beneficiaries.

Like many insurers, Florida Blue has also been experimenting with various ventures with hospitals and doctors. While UnitedHealth had difficulty several years ago starting a so-called medical home program, in which doctors would be paid to be responsible for better care and coordination of a group of patients, the Blue plan has already enlisted nearly 2,400 of Florida's doctors in the program, making it one of the largest in the nation.

Florida Blue has had some missteps, however. Working with Disney, it developed Habit Heroes, an exhibit at Epcot where children could learn healthy habits like getting plenty of exercise. But the decision to develop characters like the chubby Lead Bottom led to criticism that the program was insensitive to overweight children, and a new exhibit was introduced last month.

Even the way insurers offer plans to people covered by their employer is threatening to change, as some companies look to private exchanges, where they may contribute a fixed amount toward the policy but let the worker choose the plan and even the insurer. While it is far from clear that these private-sector exchanges will take off, Florida Blue decided to participate in one.

"There's a lot of unknown there," said Jon Urbanek, a senior vice president at the insurer. "There's a lot of risk there."

So far, the experience has been positive: the insurer says it was chosen by 90 percent of the full-time Florida employees of Darden Restaurants, of Olive Garden and Red Lobster fame, who participated in the exchange.

But Geraghty's most immediate challenge is to prepare Florida Blue for 2014, even as he worries that the logistics will become increasingly hard as critical decisions remain unmade.

While he acknowledged that the insurer had "a lot of legwork to do" to be able to start offering plans for the exchange this October, he said he wasn't losing sleep over the uncertainty. "I don't rattle easily," he said.

• Read more articles by Reed Abelson

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