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Health care reform poses challenges for area insurers

As CEO of Independent Health Association, Dr. Michael Cropp is among the most highly regarded health care executives in the region.

A medical doctor by training and insurance executive by choice, he has maintained a delicate balance between strengthening his company, tightening its relationships with providers, and working to improve the health of its members.

Buffalo News Business Reporter Jonathan Epstein sat down with Cropp recently to talk about health care reform, and the health care arena overall.

Q: Congress and the Obama Administration just passed the biggest changes to the nation's health care and health insurance system in about 40 years. How will this affect Independent Health? How will it affect the health care and insurance system locally?

A: In the short-term, it's going to provide a significant amount of stress to the health care payers and providers because it really brings forward significant funding cuts in Medicare, and we have a pretty high penetration of Medicare in our community. So there are some challenges associated with that.

For good or for bad, in New York State, we have an environment where we already have community-rating. We have a high proportion of our population on Medicare. We have a low uninsured population. And we have high levels of eligibility for Medicaid.

So while the administration is holding out hope that we're going to bring millions of people into the system, I don't think we're going to see that massive expansion in New York State. And where we see the growth, it's going to be in those government products that are currently underfunded, and in the Medicare arena, the funding's going to be cut even further.

On the bright side, there has been a provision that's been enacted that will reward plans that have been able to demonstrate excellence with higher levels of funding. So while we face significant cuts in the base level of funding, we're able to earn a good portion of that back based on our demonstrated ability to provide value and quality for our members.

Q: So is the reform good or bad?

A: Creating greater access for more Americans in a system that's already strained on the quality and affordability front was not the proper sequence, and I don't think the law went far enough to put into effect real sustainable measures to affect cost trends.

For me, the real good news in the legislation is that it's going to enable local action and the sustainable solutions are going to have to be locally owned, locally grown, locally cultivated to work. That's the silver lining in the legislation, that there's enabling of local ownership for good local solutions.

Q: Are there things that could or should have been done differently and do you think those will be changed?

A: I do think there will be some changes going forward.

First and foremost, I think that there should be some differential treatment to plans that are not-for-profit, spend less of their premium dollars on administration and profit than those who spend more.

There is more work that needs to be done in the legislation to assure that plans that are investing more to produce better quality are rewarded and not penalized. So this gets pretty technical pretty quickly.

The third thing is the whole effort that is now just being explored to really put the right emphasis on quality and affordability. The legislation did not go far enough to address issues related to quality and the underlying cost structure, but I do believe that's going to follow.

Q: Executive compensation for nonprofit health insurers has long been a subject of controversy. How can nonprofit insurers like yourselves and your competitors justify the salaries that are paid?

A: Technically we're a nonprofit, but we're a $1.5 billion company. Most of the not-for-profits, when we think not-for-profits, United Way and other agencies, we're talking about a $10 million budget, something on that order. So we're a few orders of magnitude different.

We're a not-for-profit, but we're a very complex business. So it's hard to kind of lump us into that not-for-profit category when people think of not-for-profit as the local agency that does good. Yes, we're a local agency that does good, but we do it on a scale that's 1,000 times larger than what the typical agency does.

We're well-compensated, there's no question about it. But we're not quite the same as the community not-for-profit agency in a few different ways.

Q: It's often been said that the Western New York health market is different than many others? How and why? And what role do nonprofits play?

A: It definitely plays a role, because as not-for-profits, we all have that sense of community and our boards are made up of community members who are here long after senior management come and go.

We exist here in Western New York. If we don't have good doctors and good hospitals to provide excellence in care, we don't have a product to offer. Many doctors' practices are small businesses that don't have capital. We feel a responsibility to help them make some strategic investments to improve their capacity going forward If we don't make those investments, nobody's going to.

Some of those investments are better made across the community with the three payers collaborating.

We've gotten a headstart as a community in finding some areas where collaboration just makes sense for everybody. In our community we've had the good fortune of finding some sweet spots. And I think that the not-for-profit component is a big piece of that.

Q: What challenges do we still face?

A: We have to find even more areas for collaboration. I think we have to get more community and business leaders to recognize that a community's ability to manage the quality of care and the cost trends that go along with better quality will be the single biggest factor to determine the overall economic success of that community.

And I think Buffalo's future is going to be successful because we're going to have a demonstrated ability to control health care quality and health care costs better than just about any community in the country.


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