Arkansas Blue Cross Blue Shield CEO discusses how to lower health insurance costs

Curtis Barnett is the CEO of Arkansas Blue Cross Blue Shield, the largest health insurance provider in the state.

Prior to his election as president and CEO in 2017, Barnett served as senior vice president of Enterprise Internal Operations where he was responsible for all aspects of operations, including claims administration, customer service and customer accounts for Arkansas Blue Cross and its subsidiary and affiliate companies.

Barnett began his career at Arkansas Blue Cross in 1993 as a Primary Care Network plan manager and served in a variety of capacities during his tenure with the company, including manager of Product Development, director of Enterprise Managed Pharmacy Program, and as vice president of Operations for BlueAdvantage Administrators of Arkansas. He served as president and CEO of USAble Corporation from 2008 through 2016.

He received a bachelor’s degree from the University of Central Arkansas, a master’s degree in public administration from the University of Arkansas and is a graduate of the Northwestern University Kellogg School of Management’s Advanced Executive Program.

Barnett sat down with Talk Business & Politics CEO Roby Brock for a lengthy conversation on the future of healthcare.

Roby Brock: I want to ask a very basic question that I think everyone asks at least once a year and that is, why do my health insurance premiums rise every single year?

Curtis Barnett: We’re reaching that time of year where most people are asked to choose a health plan for the next calendar year. And you know, for the most part most plans are going to have an increase next year over where they are this year. Now, there are two main components to drive healthcare costs. One is the cost of the services themself for the price of the unit price and the other is the utilization of that service and how often it’s performed.

For us, when we look at the non-prescription drug part of that trend, it’s really utilization that’s driving that. In fact, over about 70% of that non-prescription drug trend is due to utilization, increased services being performed. Now, on the prescription drug part of that, it’s almost the exact opposite where we see the price and the increases in the price of prescription drugs actually driving that part of the trend. We’ve seen for several years that the manufacturers – and that’s really what’s driving it – the prices that the drug manufacturers are charging.

We recognize that any increase creates a hardship for many individuals and for many families. I think for this year probably the increases will be a little more moderate than where they’ve been the last couple of years.

Brock: Let’s talk about utilization. You want people to use their health insurance. It makes them healthier if they are taking care of themselves or if they have an incident. So you don’t want to discourage utilization, but at the same time that’s what drives the cost up. So how do you find some sort of equilibrium there?

Barnett: We want them to use the healthcare [insurance] when they need it, and that’s a big part: preventive service. Almost all plans now have some level of preventive services. We want them to use that. We want people to detect if they have a condition at an early stage as possible so that it can be treated before it becomes much more catastrophic, so you’re exactly right. Not all utilization is bad, but when you see utilization that becomes redundant services that are being performed or maybe they are unnecessary services, then that can add unnecessary cost to the system.

Brock: So let’s talk about the drug manufacturers, the rising price of prescription drugs and how that impacts. Is there anything that can be done to reduce that? Is that a legislative solution or a political solution? Is that a business supply-and-demand equation?

Barnett: I think right now it’s all of the above. I think really to have an impact on those prices, we’re going to need greater competition, especially for generics and biosimilar drugs. There are some proposals that have been made in Washington today and Congress has in front of them. One is called the CREATES Act. The CREATES Act begins to really address some of the things that brand name manufacturers do to keep generics from coming on the market.

There’s the pipeline of generic drugs. I think at one time there were over 4,000 different generic drugs that were in a pipeline waiting to be considered and waiting to be approved. More resources could go into that to clear that up a lot quicker and get those drugs out on the market. When you look at the average cost of a generic versus a brand name drug, it’s typically anywhere from 15% to 20% lower for the generic. Another thing is what can be done around the patent protection that a lot of these brand name drugs have. Often, you’ll see that they’ll be approved for one condition and then it seems like just as that patent is just about to expire it’ll be approved for something else, and they’ll be able to extend it in some cases for about a 15-year period.

Brock: You’re a big proponent of a healthy individual market. You think that we may all rely on an individual market at some point, why is that?

Barnett: When you think about who is using the individual market today, who purchases their care through that, it is the self-employed, a lot of owners of small businesses, people, retirees who may not be 65 yet and eligible for Medicare, people who are in-between jobs or maybe their employer doesn’t offer, they’re not eligible for their employer health insurance, the gig economy which is continuing to grow.

These are people who mainly have their employment as contracted workers, so they’re freelancers in many cases and they buy health insurance typically through the individual market, and that’s a growing segment within our economy of workers.

If you look today at our uninsured rate, it’s about 10% nationally are uninsured. Arkansas is about the same level. Most of that 10% comes out of people who could be or should be purchasing coverage through the individual market. We need for them to have coverage. We want them to have coverage.

Someone who has health insurance is much more likely to seek care at an earlier stage and use their preventive benefits than somebody who doesn’t. We know that providers who have high amounts of uncompensated care in many cases are forced to cost shift to some of their patients or categories of patients who have insurance in order to spread their costs in an appropriate way. Also, we have found that the larger the risk pools are typically the more predictable they are and they help really provide more reliable and predictable health insurance rates for everybody else.

There’s a lot of good reasons that we need a strong individual market. As we look into the future and ways that we can do that, I think the first place that we need to be looking is, what can we do today to basically improve the Affordable Care Act, the system that we already have in place to meet the needs of the individual market? I think there are some changes there that we can make to it where it’s much more stable than it is today and can help us really solidify that individual market.

Brock: What do you think would help solidify that market in a bigger way? Is the individual mandate a part of it?

Barnett: I don’t think so. I think the first thing that we look at are the tax credits that are available today or the subsidies that are available. I think when the Affordable Care Act was passed it was particularly heavy on the elder workers or the elder individuals and it really provided some relief for them and probably not enough was done at that time for the younger workers. We’ve seen younger people, in a lot of cases healthier people, they’ve chosen not to get health insurance because they feel like they don’t necessarily need it.

Brock: You’re invincible when you’re young, Curtis.

Barnett: You’re exactly right. So what can we do to improve those credits so that it lowers the cost and will bring more of that younger population into the individual market?

The second thing is you have the cost-sharing protections that are within the Affordable Care Act today. They’re in the Affordable Care Act so that the lower you are on the income range then in many cases the co-payments or the coinsurance may be waived to make it more affordable for these individuals. Again, I think there are some things that we can do based upon age to help keep the younger people in this as well, as well as income. So maybe up to, from 250% of the federal poverty level to up to 300% of the federal poverty level, if we can extend that.

I think a third thing is if you look at that individual market about 5% of the participants in that market account for about 60% of the cost. And so what are some things that can be done either at the national level or at the state level to create a re-insurance mechanism and so that the carriers who participate in this can actually share the risk of these high-dollar cases, and so we can pull some of that risk together. Some of the studies that have been released have indicated that we could reduce overall premiums by as much as 33%, and so that reduces the cost.

Brock: There is a raging debate going on at the national level right now regarding ‘Medicare for All.’ That debate is probably dependent on who wins the 2020 presidential election and who controls Congress. What do you see when you look into your crystal ball on this issue?

Barnett: I think you make an excellent point. I think the next election’s going to have a big impact on that, but I’m not one who believes that we’re going to move to a ‘Medicare for All’ system. I think part of the reason for that is if you think about why some people may be attracted to ‘Medicare for All’ is the ‘for all’ part of that. It’s basically a way to ensure universal coverage.

If we can do the kind of common-sense things that I just talked about with the individual market and really address that 10%, then I think we can hit that broad base of near universal coverage level by being able to take those types of actions.

We wouldn’t have to disrupt the system – the 157 million Americans today who get their coverage through their employer. I’m someone who tends to believe we won’t move forward with ‘Medicare for All,’ but I do think we are going to see some changes going forward, and I think that’s just something we expect.

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Editor’s note: You can watch a 30-minute interview with Barnett on additional healthcare topics, including the opioid crisis, behavioral health, and food insecurity in the video below. The transcript above has been slightly edited for brevity and clarity.