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I N T E R V I E W : WellPoint's CEO believes that innovative uses of current market tools John Iglehart: For readers who need an update on the status of WellPoint, why don't we begin with some facts on your company. How many individuals does WellPoint insure, how many benefits does it administer for self-insured employers, and what are the annual revenues and returns on investment of your stockholders? Larry Glasscock: John, by membership, WellPoint is the largest health benefits company in the country, with 34.2 million members, about 50 percent of whom we fully insure. In terms of operating revenue, we are one of the largest companies in America--ranked thirty-eighth on the Fortune 500 list--with a projected total of more than $56 billion in 2006. More than one in every ten insured Americans carries one of our ID cards. The great majority of our members are served through our Blue Cross or Blue Cross and Blue Shield companies in fourteen states. We also serve members across the country through our non-Blue company, UniCare. Iglehart: And how many of those 34.2 million members are publicly insured through Medicare and Medicaid? Glasscock: WellPoint serves more than 1.2 million members in Medicare Advantage [MA] plans or with Medicare supplemental benefits, and another 1.5 million in prescription drug-only plans. We are the second-largest Medicare contractor--and actually the largest Part A intermediary. In 2005 we processed 211 million Medicare claims. WellPoint is also the nation's largest private payer in the managed Medicaid program, with more than 1.9 million members. Iglehart: In recent years, an increasing number of states have promoted the enrollment of more Medicaid recipients into managed care plans, through either voluntary approaches or mandatory requirements. Is WellPoint interested in expanding its role in Medicaid? Glasscock: Yes, we are. We believe that outcomes are better and costs are lower when Medicaid recipients have access to the type of coordinated care that we provide. That is why I think we are seeing more and more states move in this direction. John, when states rely on a fee-for-service system to deliver care, Medicaid beneficiaries are provided with a benefits card and essentially are left to access and coordinate services on their own. Medicaid managed care programs, on the other hand, are held accountable for beneficiary outcomes and the quality of the delivery system. Through effective care management programs, WellPoint has improved outcomes and decreased costs. Let me give you a specific example. Beneficiaries in our Asthma Management Program experienced a 40 percent decrease in emergency room [ER] visits and a 49 percent decrease in hospital inpatient admissions after enrolling in the program. Similarly, after enrolling in our Emergency Room Initiative, beneficiaries experienced a 49 percent decrease in ER visits and a concurrent 46 percent increase in member visits to primary care physicians and specialists. Additionally, WellPoint has been able to significantly increase the appropriate use of generic drugs among our Medicaid enrollees, which translates into real savings for states while providing quality health care for beneficiaries. For example, WellPoint's pharmacy utilization is 80 percent generic and 20 percent brand-name, compared to the national Medicaid average of 48 percent generic and 52 percent brand. Iglehart: I assume that most of your Medicaid enrollees are mothers and children. Does WellPoint have an interest in expanding its role in Medicaid by enrolling disabled and elderly people, who generally have far more serious health problems? Glasscock: There is significant interest among states in moving aged, blind, and disabled [ABD] Medicaid beneficiaries into managed care, and we believe that beneficiaries, states, and plans can all benefit under that scenario. We have been promoting the importance of that, because we believe we could do a much better job for this population than has been done in the fee-for-service environment. Without question, elderly Medicaid beneficiaries and those with a disability face financial challenges, and many have unique social service needs that can create barriers to care. The ABD population represents about one-quarter of Medicaid enrollment, but about 70 percent of total Medicaid spending. Since the majority of the ABD population remains in fee-for-service, states are realizing that managed care holds real potential for improving beneficiaries' health outcomes while reducing cost trends. In California, for example, over 40,000 ABD beneficiaries have voluntarily enrolled and chosen to stay with WellPoint, even though they have the option of going back to fee-for-service at any time. We believe that this is a reflection of our commitment to our members and the effectiveness of our programs. In fact, a member satisfaction survey found that 97 percent of our ABD members were very happy with WellPoint, and 90 percent preferred it to the fee-for-service system. Let me add that with this population, it is imperative that states set actuarially sound rates, as federal regulation requires. For states that choose to go down this road, the public-private partnership between states and Medicaid managed care plans must be made sustainable for the long term. Banking And Health Insurance Iglehart: You have an interesting career path that evolved from banking to health insurance. Give us a little flavor of your early experiences, and tell us whether there are similarities between the banking and health care businesses. Glasscock: When I was in banking, one of my areas of focus was setting up a lending specialty in health care. So I was able to see the industry from a financial perspective. In 1987 I was asked to join the board of a Blue Cross and Blue Shield plan. From that vantage point, I got to see health care from about 30,000 feet. When I made the transition in management from financial services to health care, I was fascinated by health care because there isn't any business more personal than one's health. It's also a good deal more complicated than banking. If you think about the technology, banking is certainly more straightforward. Iglehart: Given your knowledge of banking and financial services, do you anticipate that these firms will become more formidable players in health care? I would note that UnitedHealthcare bought a bank not long ago. Glasscock: Financial services, at least in the commercial banking arena, have been more focused on the brokerage aspect of insurance--in other words, being able go to their individual or small-group clients and say, OK, we can help you find coverage. They haven't been very involved in the underwriting of insurance. However, we are seeing some convergence of financial services and health care, driven in part by this whole notion of consumer-directed health plans, health savings accounts [HSAs], and financial resources that will be dedicated to that. So I think that the question then becomes, to what extent will insurers allow themselves to be disintermediated by the financial services enterprises? The Blue Cross and Blue Shield system has formed a bank called the Blue Bank, and WellPoint is one of the investors in that bank. Iglehart: Would it surprise you if the Bank of America, Wachovia, or American Express made a serious effort to become a formidable force within health insurance? Glasscock: No, John, it wouldn't. Changes In The Insurance Market Iglehart: As the nation's largest health plan, and as a consolidator of fourteen Blue plans into a public company, how does WellPoint, and you particularly as its CEO, see the health insurance market changing? Glasscock: I think it's changing in a number of ways, driven by several factors, really. These factors are what we call the "burning platform" issues, and I would put them into four buckets. First is affordability: the rate of medical care usage and the rate of inflation in health care costs. Second is the number of uninsured people in the nation. As we all know, approximately forty-six million Americans lack health insurance. We must figure out a way to make sure that our citizens have adequate health coverage. Third is quality and safety. According to a recent study, only about 55 percent of the care delivered in this country could be described as appropriate. Fourth is the state of public health: high and rising rates of obesity, type 2 diabetes, and other potentially preventable health conditions. And unfortunately, it's not getting any better; it's getting worse. When you look at those four issues, it's clear that American health care faces multiple challenges. Looking into the future, I believe that we will see a health care system that is much more driven by the consumer. It is more than just consumer-driven products and HSAs. It is really about a whole strategy of putting consumers more in control of their own health and their health care, injecting greater individual responsibility into the equation. Is this the answer to all that ails the health care system? Not necessarily. But it is an important part of the answer. Iglehart: That also means, I assume, placing consumers in the driver's seat to determine how much care they can afford, and what kind of treatment is most appropriate for whatever their illness may be. However, this model requires a lot of trade-offs that could present quite a challenge, particularly for someone who is coping with serious illness. How do you address this challenge? Glasscock: First of all, I think it is incumbent upon us to have a broad range of products so that consumerism is an option, not a requirement. We're sensitive to the affordability issue and the imperative of getting consumers the information they need to make better decisions. For example, we have a product that was initially introduced in California called Tonik. It was designed specifically to get at what we call the "young invincibles"--the nineteen-to-twenty-five-year-olds, many of whom don't have coverage because they often think it's unnecessary and expensive. But with the introduction of this new product, combined with our other product offerings, last year we sold policies to 378,000 people who had previously been uninsured. Iglehart: I believe that the monthly premium for Tonik is about $100. Is that correct? Glasscock: The premium varies of course, but it can be as low as $69 per month. Iglehart: What is left uncovered? Glasscock: Tonik is actually three products, using names that these young invincibles can relate to. The highest level of coverage is in the Calculated Risk Taker (with a $1,500 deductible), followed by the Part-Time Daredevil ($3,000) and the Thrill Seeker ($5,000). Outside of the deductible, the product designs are essentially the same: They cover office visits, ER care, prescription drugs, hospital services, dental, and vision. Iglehart: You mentioned an ongoing effort by both private and public insurers to inject more individual responsibility into the equation of health insurance. The recent reform plan enacted in Massachusetts includes an individual mandate that people carry health insurance; for those who cannot afford it, the coverage is subsidized. Does WellPoint support this form of individual responsibility? Glasscock: John, while the Massachusetts plan represents a step forward in trying to find solutions for the uninsured, I have several concerns about its individual mandate. Under the new law, individuals are only required to obtain coverage if it is "affordable" for them. But the Massachusetts law, as I understand it, preserved all of the commonwealth's existing benefit mandates, so it is difficult to see how health insurance coverage under the new program will be any more affordable once the mandate to purchase coverage becomes effective than it is today. Also, the penalty imposed on those who fail to obtain coverage might not be sufficient to ensure that everyone does so. At the same time, the penalty on employers might not be sufficient to maintain current coverage. In my opinion, the development of innovative, affordable health insurance products could do more to reduce the number of uninsured people than a mandate with potential limitations. In some cases, the law permits health insurance carriers to develop less restrictive products--for example, for young adults. This flexibility will allow for the development of products like Tonik for younger adults who frequently find more comprehensive coverage to be unaffordable--but I think more could have been done in this area. A number of provisions in the law are very interesting and innovative. Massachusetts, like its neighbors Vermont, New Hampshire, and Connecticut, has expanded coverage through SCHIP [the State Children's Health Insurance Program] and Medicaid to children below 300 percent of the federal poverty level. WellPoint has long maintained that all children must be insured, and we support state programs that allow families who otherwise would be unable to insure their children to do so. The expansion of outreach efforts to enroll those who are eligible for such programs is also an important piece of the uninsurance puzzle. Iglehart: How do you see the competitive landscape for health plans changing? Glasscock: First of all, health care is a very competitive market. And I think that's good for consumers. There is consolidation going on in the industry. All of the players now are very strong competitors and have good product offerings on the market. And WellPoint is continuing to grow. Last year we added about 1.2 million members just through organic growth--a rate of about 4.3 percent. That growth was realized in all of our business segments and did not include the membership we added through the acquisition of WellChoice. Iglehart: Do you anticipate further consolidation? Glasscock: I do. If you look at other industries, where economies of scale exist, you see more consolidation. Ten years ago, in our business, the top ten insurers covered about 27 percent of the membership, nationally. Today the top ten companies cover about 50 percent. In ten years it has consolidated that much, and I think that it will continue in the future. Role Of The Employer Iglehart: When you look over the coming decade or two, in terms of who's actually sponsoring insurance, and you talk about consumer-directed care, do you anticipate that employers will continue to play their traditional role as sponsors of their employees' coverage? Or will the relationship be between WellPoint and an individual who decides what he or she wants in terms of coverage? Glasscock: I think it will become more consumer-based over time. But I think that the employer will continue to be a very important part of the mix. Iglehart: What kind of coverage does WellPoint offer its employees? Glasscock: That's an excellent question. I happen to be enrolled in a consumer-driven health plan myself. We offer that as an option to our employees through our subsidiary, Lumenos. Lumenos was one of the first in the market with consumer-driven products, offering HSAs, health reimbursement account [HRA] plans, and health incentive account [HIA] plans, as well as information, services, and incentives for members to become better informed about their health and engage in health-promoting behavior. By acquiring Lumenos, we were able to combine its consumer-driven focus and expertise with our Blue networks to more quickly build upon and enhance our existing consumer product portfolio and offer our members innovative, proven health solutions. Interestingly, Lumenos was able to tell us, within a percentage point, what percentage of our employees would enroll in this consumer-directed option. We've offered it now since last year, and we've had substantial uptake among our employees. Iglehart: Are you familiar with the demographics of that group? Glasscock: It's very diverse. We can provide a demographic portrait of employees enrolled, but we can't report on health status right now. We hope to be able to provide this type of information next year, after we've had more experience with this product. In 2005, 17 percent of WellPoint employees chose the HRA product. The consumer-directed product did seem to attract younger employees: 45 percent of employees enrolled in that program are younger than forty, compared with 41 percent of employees in that age group who are enrolled in non-consumer-directed products. The consumer-directed plan also attracted a higher percentage of single contracts: 41 percent of employees who elected the consumer-directed plan selected employee-only coverage, compared with 37 percent of their peers in non-consumer-directed products. Iglehart: Did you use price incentives to get employees to join the consumer-directed plan? Glasscock: No. The employee contribution was based on the plan's true expected cost. Iglehart: Does the company's contribution to the premium differ, based on the benefit package selected? For example, if I selected a high-price plan, would I have to contribute more, in terms of my payroll deduction? Glasscock: Yes. Iglehart: Let me turn to a more political question. Since you mentioned affordability and the uninsured as being two major issues not only for a large company like WellPoint but for society, if you were advising a presidential candidate, would you suggest that he or she focus on one or the other? Or can we do both at the same time? Glasscock: I think that we have to do both at the same time, because they're inextricably linked. If you think about the uninsured--and you know these numbers well, John--to address this issue in a meaningful way, you've got to drill down on the details. About a third of the uninsured are already eligible for various state or federal public programs, but they're simply not enrolled. Another third of the uninsured are in households with incomes of $50,000 or more. So, with the right education and the right product choices, one could argue that these folks should be able to afford coverage. The final third are the people in the middle, who are working and don't have the financial resources to afford coverage. I think we've got to have very specific strategies for each group. I happen to be a proponent of tax credits for people in the middle, to help them purchase coverage. Understanding Variation Iglehart: One of the things that your predecessor, Leonard Schaeffer, was interested in--and presumably you are, too--is the variations in clinical practice patterns that Jack Wennberg has been documenting for thirty years. Through the pay-for-performance [P4P] window, if you will, are you seeing any reduction in variations in any of your markets? Glasscock: Increasing numbers of physicians and hospitals are engaged in quality improvement pay-for-performance programs at WellPoint. In 2005 we paid more than $100 million to physicians and hospitals for improvements in quality. Let me share a few examples. In our hospital P4P program in Virginia, we're seeing improvements in performance and reduced variation around specific measures. One key measure, for example, is how quickly a patient's blood vessel is opened during a cardiac event. This measure has seen a reduction in variation across hospitals and a more rapid response time, meaning that patients are receiving the proper care more quickly. WellPoint's plans in New Hampshire, Maine, and Connecticut have also taken a leadership position in addressing costly and potentially harmful variations in physician practice patterns. The Anthem Quality Insights [AQI] program rewards physicians for meeting or exceeding established targets in nationally recognized measures of quality. Although it doesn't specifically address variations in practice patterns, it lays the foundation for reducing variations by encouraging physicians to focus on improved health outcomes among members. The goal of the [AQI] program is to redefine the relationship that health care providers have traditionally had with insurers by creating a mutually beneficial, patient-focused collaboration. Similarly, hospitals in Indiana, Kentucky, and Ohio are rewarded through a P4P program for demonstrating improved care by exceeding quality goals. These goals include reducing variation in patient care, such as decreasing mortality and return-to-surgery rates for patients undergoing coronary artery bypass graft. Here's an example of the program's impact: Hospitals that participate increased the prescribing of aspirin and beta-blockers at discharge after heart attacks, which clinical research has found to reduce mortality and morbidity. We're now implementing the program in Missouri and Wisconsin. Let me add that we do not look at market share as a criterion for the development and implementation of our quality incentive programs. The degree of reimbursement is determined locally, based on local market conditions. Although the level of reimbursement depends on a number of factors, there is a substantial level of additional reimbursement available for achieving well-defined and accepted performance measures. Iglehart: How do you deal with underperforming physicians? Glasscock: WellPoint's current quality incentive program does not specifically measure over- or underuse. Our approach has been to reward physicians who perform at or above the established thresholds set in the program. We reward "performing" physicians in our pay-for-performance programs, but we don't take money away from those who perform less well. On the HMO [health maintenance organization] side, where we have a longer history with physician performance initiatives, we are able to use our clinical quality information for targeted interventions to the medical groups. The fact that there is a financial bonus linked to the quality metrics has been helpful in engaging the groups in improvement activities and performance. On the PPO [preferred provider organization] side, we will be expanding our measurement and incentive program statewide [in California] as well as using a Web-based report card and patient registries to complement individual physician quality improvement efforts. Frankly, measuring performance is complex. We do not actively remove underperforming physicians (from either a cost or quality perspective) from our networks, assuming that their level of care continues to at least meet the minimum network requirements to participate and pass all of the various credentialing requirements. If there are major quality issues, we investigate and deal with those situations case by case. Our goal is to work with physicians to attain the highest quality of care for their patients and create an attainable P4P incentive program. If the bar is set too high, physicians might not have an incentive to change their practice patterns or behavior. WellPoint does plan to pursue the establishment of "Value Networks" in the near future, which will begin with twelve specialties in thirty-nine metropolitan markets in 2007. These networks will be based on efficiency and cost. To be included, physicians must have achieved at least 10 percent lower costs than PPO rates. More markets will be added in 2008, as well as quality metrics for each specialty. More specialties will be added in 2009, along with increased coordination and integration with our P4P programs. Physician-Insurer Relations Iglehart: Let's turn to a related subject. The relationship, generically, between insurers and physicians has never been terribly good, whether it's WellPoint or another company. Is that simply endemic, given the different roles that they play as the third-party payer and the provider of care? Glasscock: First of all, I think that payers and providers have to approach that relationship on the basis of a partnership, not as a vendor. This is critical because there's always going to be some level of dynamic tension in the relationship, but we all have a common goal. Providers want to give their patients the best care they possibly can, and we want our members to get the best care they possibly can. Our whole pay-for-performance initiative is really about making sure that we can recognize those true differences out there between providers and pay them accordingly. Participation in both our physician and hospital incentive programs is voluntary, although primary care physicians in some markets may be required to participate. Participation rates for both programs have been excellent. For example, in our Northeast markets, approximately 80 percent of eligible primary care providers participate in the incentive program, and in Virginia, approximately 80 percent of our hospital admissions occur at a facility that participates in our hospital incentive program. Overall, we have experienced very little pushback from physicians regarding our pay-for-performance programs. We have found that engaging the physicians in developing the program increases the level of buy-in. For example, in the West Region we have had significant support from the physician community, as we've worked with various provider associations to set appropriate measurements and update them over time. In addition, WellPoint has created several mechanisms to assist physicians in reporting information back to us. Our ultimate goal is to develop interoperability between the health plan system and the provider system to electronically submit and receive data. Role Of Corporate America Iglehart: Paralysis exists in Washington today about moving health policy forward. It is a truism that nothing much happens in America if the Fortune 500 or 1,000 companies aren't pretty solidly behind whatever the initiative may be. Do you believe that corporate America needs to stand up and be counted here in a more energetic way than it has to date, in terms of trying to improve the system? Glasscock: Employers are becoming more involved. Fortune 500 CEOs like Rick Waggoner at GM and Jeff Immelt at GE are beginning to take a very public stance on health care issues. And employer coalitions like the Washington Business Group on Health, the Pacific Business Group on Health, and Gateway Purchasers for Health are actively soliciting new members. These groups are using their leverage to push health plans to focus on improving health care quality through data sharing. WellPoint works closely with all of these groups. The Leapfrog Group is another example of a major effort by employers to be more involved in the health debate. Leapfrog is an initiative driven by organizations that buy health care that are working to initiate breakthrough improvements in the safety, quality, and affordability of health care. It has more than 170 members, including Fortune 500 companies and other large private and public organizations that provide health benefits for their employees, retirees, and dependents. There is an array of other activities under way too numerous to recite, but suffice it to say that the employer community is certainly becoming more engaged. Iglehart: Why has it taken so long for the employer community to do so when rising health expenditures have been a serious concern of companies for many years? Glasscock: It has been difficult oftentimes for employers to directly address the cost issues that have resulted from increased pressure on managed care contracts. The reasons for this are varied. Hospital reimbursement is complex. Payment methodologies are difficult to understand for those not familiar with them. Risk-adjusted comparative cost data on hospitals are not readily accessible, and many plans aren't able to make these comparisons. The ones that do face challenges communicating such information to employers. During managed care contract rate negotiations, hospitals sometimes challenge such cost comparison data. And hospitals, which often count respected local business leaders on their boards of directors, have a lot of credibility with regard to the challenges they raise. So employers feel caught in the middle between their local hospital and their managed care company. Transparency is another major barrier for employers. Hospitals and physicians are often understandably uncomfortable allowing specific information to be shared. For transparency to work, all stakeholders--hospitals, physicians, employers, and insurers--must find ways to collaborate and work together to create a system that benefits all parties. WellPoint's Strategic Planning Iglehart: I understand that WellPoint has invested a lot of thought and time in a strategic plan aimed at where the company would like to be by 2010. What goals has WellPoint set for itself through its strategic plan? Glasscock: Well, it's a vision. A strategy is something that you want to be aspirational and, at the same time, inspirational. We've tried to outline where we think the health care system needs to change. The way we get there is through two differentiating strategies. One is to be the most trusted choice for consumers, and the second is to be the leader in high-quality, affordable care. Our board has approved around twenty-seven measures that will allow us to assess whether we, in fact, did accomplish these goals. Let me mention a few of these measures. One is what we call the Member Health Index. By 2010 we want that index to be 20 percent better than it is today. The index includes twenty measures in four areas. In the area of screening and prevention, for example, we measure breast cancer screening, cervical cancer screening, colorectal cancer screening, screening adults for high cholesterol, and childhood immunization. In the area of care management, we measure compliance with diabetes treatment, hypertension compliance, the rate of behavioral health follow-up within seven days, and so on. It's a very rigorous analysis of the state of our members' health and whether, through our products and services, their health status has improved. Another activity will focus on the fact that we have the number-one market share in thirteen of the fourteen states in which we operate Blue Cross or Blue Cross and Blue Shield plans. Based on public health measures reported by the Centers for Disease Control and Prevention and by states, we have calculated an index for the health status of a given state. Many of the states in which we have a leading market share are relatively unhealthy by that measure. One of our goals is to improve the health status of these populations--not just among our members but across the entire state. Another measure the WellPoint board has established is how successful we are in reducing uninsurance in all of the states where we operate. Iglehart: It sounds like you're going to become not only a health insurer, but also a public health company. Glasscock: As I said earlier, the state of our public's health leaves much to be desired. We've got to do everything we can, working collaboratively with physicians and hospitals, state health departments, and others, to improve the health of the population. Data And Information Technology Iglehart: A company the size of WellPoint has a lot of data from claims and membership stored in its computers. Can you foresee the day when purchasers will demand that data on the the professional performance of individual physicians and hospitals be made public? Is that part of the consumer revolution that you suggest is under way, or will privacy constraints stand in the way? Glasscock: Your question addresses some of the key issues around transparency. Transparency describes the process by which consumers can obtain meaningful information about quality and cost for the services offered by physicians and hospitals. WellPoint's view is that providing consumers access to quality and outcome information can help drive down costs. The more information consumers have about their health and health care options, the better decisions they can make about their overall well-being. That is why we are introducing new tools to our members to help them better understand how they can improve their health and the options they have when they need to seek care. Transparency is an emerging issue, and there are numerous legislative proposals at the federal and state level to mandate the reporting of quality and cost information. We intend to take a leadership role in working through these important public policy debates. To be successful in executing our two differentiating strategies--becoming the leader in affordable, quality care and the most trusted choice for consumers--we have to become leaders in providing meaningful information and data to our customers. The challenge will be to continue to engage providers in these programs while, at the same time, making information available to consumers. We believe, however, that the market will ultimately demand disclosure and that such transparency of quality and cost information will eventually become a normal course of business. We do believe that we need to be cautious in providing the right amount of meaningful information to assist consumers in becoming more informed about the health care decisions they make. For example, it's imperative that quality information accompany disclosure of information about cost. Without it, many consumers may be inclined to believe that higher cost is associated with higher quality. It is a challenge for us to make certain that the information we share is accurate and that we describe what we measured; why we measured it; and what conclusions, if any, a consumer may draw from these observations. In sum, I believe that insurers today can make important improvements in health and health care through the tools we have available to us today. We can and must make these improvements for the benefit of our members and those who pay for the care they receive. Larry Glasscock is chairman, president, and chief executive officer of WellPoint Inc. in Indianapolis, Indiana. When Anthem Inc. merged with WellPoint Health Networks Inc. in November 2004 and was subsequently renamed WellPoint Inc., Glasscock was serving as chairman of the board, president, and chief executive officer of Anthem. John Iglehart is the founding editor of Health Affairs. DOI: 10.1377/hlthaff.25.1.w13
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