CFO Studio Magazine with David Huber

8 WWW.CFOSTUDIO.COM 4th QUARTER 2012 million residents uninsured between 2009 and 2011, according to U.S. Census data, most of whom will be expected to enter the insurance system within the next few years. For Horizon BCBSNJ, this moves the company’s primary customer base from corporations to individuals. “Historically our business has been a wholesale business where mostly we sell to group customers,” says Huber, whose full title is senior vice president – administration, chief financial officer, and treasurer. “In the new world, it’s a combination of wholesale and retail, where we are going to be doing much more direct-to-consumer.” The looming deadline for Huber and other insurance providers is the start of 2014, when health insurance exchanges, in which the government will provide subsidies to uninsured or under-insured individuals who purchase their own insurance, are expected to be operational. Customers will buy their insurance directly over the web, as many do now with automobile insurance. But while the PPACA outlines the creation of health insurance exchanges, it leaves the nuances of how they will operate to the individual states, which can elect to self-operate the exchanges, or leave operation to the federal government, or do a combination of both. New Jersey, along with 33 other states that have received grants for these exchanges, has until November 16 to declare whether it will implement its own statewide marketplace or join a federal one. At the beginning of Octo- ber, the bill for a state-run exchange passed the Senate with no Republican support. Advocates of the bill maintain that a state-run exchange will allow New Jersey to have more control over how their state’s exchange is implemented, while those in opposition sug- gest that the state should wait and see what the federal government offers. Horizon BCBSNJ will have insurance products on the exchange, and therefore Huber has to prepare the company for each of the possibilities foreseeable under the PPACA. The company has conducted exten- sive scenario planning to understand how it might compete under a variety of different outcomes with regard to the health insur- ance exchanges. His team must consider how competitors might price their products and services in a market that has never existed. Determining how Horizon BCBSNJ can capture market share and balance that against potential risk, while remaining nimble enough to adapt when reality turns out differently than their simulations predicted, is keeping Huber and his team very busy. “The law is written at a very high level, supported by regulations, and we’re trying to build something to compete in the market- place in 2014, which really means we have to go live in October of 2013, but we really don’t know what any of the rules are,” says Huber. “Frankly it’s a very challeng- ing environment, because there’s so much uncertainty about the future.” Adding to these vari- ables, experts predict the changes ushered in by the PPACA are also expected to spur M&A activity as margins shrink across the insurance industry. Business Challenges It need hardly be said that Horizon BCBSNJ is not the only insurer concerned about the direction of the industry. At a conference in Las Vegas this past February, Aetna Presi- dent Mark Bertolini told the audience that, “The system doesn’t work, it’s broke today. The end of insurance companies, the way we’ve run the business in the past, is here.” He expressed particular concern about the ban on medical underwriting, as well as the minimal medical loss ratio requiring insurers to spend 80 to 85 percent of their premium revenues on claims and quality improvement, put forward by the Affordable Care Act. For Huber, the biggest challenge may be the sheer length of his to-do list. “Our project appetite is insatiable,” says Huber. “We’ve got limited resources, so we need to prioritize based on the most pressing needs and where we expect to get the ROI.” To figure out what to tackle first, Horizon BCBSNJ created a group called the Office of Healthcare Reform (“It sounds like the government,” Huber jokes). The Office is responsible for determining what steps the company should take to implement every aspect of the PPACA rollout. Among these preparations for the changes in insurance has been a greater investment in technology and data gathering to help Hori- zon BCBSNJ understand who the company’s potential customers might be, how to segment its market, and what messages might best work for its customers. With the number of transac- tions online, over the phone, and elsewhere expected to increase significantly, Huber has worked with other departments to automate service and reduce costs where possible. Employers and plan sponsors are increas- ingly passing more costs to employees, and COVER STORY Scenerio planning helps Huber and his team envision the competitive arena In Huber’s purview is the move from a wholesale to a retail model STEADY IN A STORM