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Wellmark Blue Cross and Blue Shield of Iowa doesn’t have a problem with the concept of providing universal health coverage, says its chairman and CEO, John Forsyth.

“What we disagree with is having some kind of a government program to drive down costs,” said Forsyth, whose Des Moines-based company covers roughly one out of every three Iowans.

Though they may not react as strongly as some participants at recent town-hall health-care forums, representatives of Iowa’s health insurers have plenty of concerns about the consequences reform could have for the industry.

Among those concerns is that a government-run system that’s based on Medicare reimbursement rates would provide an unlevel playing field on which private insurers would be unable to compete. Industry representatives in Iowa also question the notion that a government-run program would operate more efficiently than private-sector plans.

“Where (is government) going to get the efficiency?” Forsyth said. “Do they think the federal government is going to negotiate with every single doctor in the country? That’s kind of a stretch for me.”

In a recent national survey, only 30 percent of health-care industry executives said their companies are ready for reform and changing economic conditions. The survey, conducted by global consultant McKinsey & Co., asked payers, providers and pharmaceutical companies how prepared they are for changes. The majority of the respondents, 76 percent, said the impact of reform on the industry would be significant, and 54 percent said the same about the effects of the current economic crisis.

“I’d be in the 30 percent that thinks we’re very well prepared for health-care reform,” Forsyth said of the report. “I think of us as a giant co-op. We’re owned by our members, so we need to do what makes sense for our members.”

Forsyth noted that Wellmark has begun several initiatives over the past few years to address rising costs, among them setting a goal to reduce its premium increases to no more than the rate of inflation by 2014.

“We’re still trying to figure out how to (do that),” he added. “So we set out with a stretch goal that no (other company) has been able to accomplish yet.”

In Iowa, the average annual premiums paid by small businesses have more than doubled since 1999, increasing by more than 11 percent per year on annualized basis, according to a research report from the Iowa Policy Project.

Wellmark also supports eliminating maximum coverage limitations on policies, and the company has in fact increased its maximums on some policies in recent years, Forsyth said. Two years ago, it began guaranteeing coverage to individuals moving from a Wellmark group plan to an individual plan as an alternative to them going into the state’s high-risk pool. Likewise, the company supports eliminating limitations on coverage of pre-existing conditions and providing for guaranteed issue of health insurance, he said.

“But to do that, you have to have everyone in your risk pool,” he said. “If you say that not everyone has to buy health insurance, then the healthiest are not going to participate (which would drive risk and costs up for those who are in the group). Part of Massachusetts’ experience (in providing a universal plan) is that the healthiest said, ‘I’m not going to participate.'”

Cost shift

Steve Flood, a senior vice president at Holmes Murphy and Associates, in a separate interview said that a government-run plan would be devastating to the private insurance industry. The West Des Moines-based company is the 24th-largest insurance broker in the country.

“The reality is, a public option will eliminate all private (health) insurance over time,” he said.

Because Medicare only pays for approximately 65 percent of medical costs, private insurers are forced to make up the difference, resulting in a cost shift to private insurers who pay the difference, Flood said.

“Right now, we do have a public plan, by all intents and purposes, because no one is really denied care,” he said. “When it really comes down to it, you’ve got about 12 million to 14 million (people) that truly don’t have insurance, but they’re not going without health care.”

Forsyth said that without that built-in cost shift, Wellmark would be able to offer health insurance rates that would be about 15 percent lower than what it charges now.

“We’re going to continue to keep making up that difference,” he said. “So if there is a (government) payer that competes against us, and it has by definition a lower reimbursement rate, our response is going to be: How can we pay our providers less – not more.”

Having a government option also would lead to physicians and hospitals being paid less for procedures in order to save money, which would exacerbate the problem that Iowa has in recruiting and retaining doctors, Forsyth said.

“You can always reduce the level of reimbursement one time to cut costs, but then you have to have something to change the rate of increase (in costs),” he said.

More accountability

The fact that individuals should play an important role in lowering health-care costs has been “completely ignored” in all the reform measures that have been discussed, Flood said.

“The only way we’re going to truly reduce health-care costs is to reduce the amount of sick people that we’re producing,” he said. “The reason they don’t want to talk about that is because increased health means increased accountability for citizens. … “If people have to pay for the consequences to their health with their own money, they’ll be more responsive to changing their behaviors.”

Truly restructuring Medicare would be a good starting point for reform, Forsyth said.

“And if it was more innovative, it would figure out how to reimburse for value, not for volume,” he said. “And if it could do that, we could lower rates by 15 percent in Iowa. That would be a good place to start reform. The problem is, it’s good policy, but bad politics. It’s hard to get the big states to give something to bring about change.”