If the health insurance business is about managing risk, why would anyone make a bet on the individual markets this year? But that is exactly what Paula Steiner is doing.
While many of the biggest names in the business—Aetna, Anthem, UnitedHealthcare—are fleeing the individual markets, Steiner and Health Care Service Corp. are hanging tough and staying in them in five states, while keeping their options open and not making a final decision until the fall. By then, HCSC will know more about what it can charge in each state and about the biggest risk in health care insurance today—whether Senate and House Republicans and President Trump will be successful in repealing and replacing large parts of the ACA.
Even if she wasn’t going against the grain, Steiner, 60, would rank among the most important health care executives in the country. HCSC isn’t going to win awards for name recognition—Health Care Service Corp. could be almost any kind of health care company. The parent company for Blues plans in Illinois, Montana, New Mexico, Oklahoma, and Texas, HCSC is the country’s fourth-largest insurer by revenue (nearly $35 billion in 2016, the company says) and members (15 million), and the second-largest Blues plan after for-profit Anthem. The headquarters in downtown Chicago are in a gleaming, 57-story office building that the company owns.
What led to Steiner’s interest in health care was her rejection for a job as a lifeguard while she was in high school, according to a 1997 Crain’s Chicago Business profile. An avid swimmer, Steiner instead got a job that summer doing some pretty dry stuff—coding data at the health care consulting firm now known as the Lewin Group.
After four summers at Lewin, Steiner went to the Wharton School and then, MBA in hand, to work for the Blue Cross Blue Shield Association, beginning an all-Blues career path. She was the senior vice president of brand enhancement for the association before assuming various executive roles with Blue Cross Blue Shield of Illinois and HCSC. In July 2015, she was named HCSC’s president and then added the CEO role in January 2016.
Partly under Steiner’s leadership, HCSC has recovered nicely from losses after the ACA was implemented in 2014. In that first year, the company reported a loss of $281.9 million. The next year was better but HCSC still lost $65.9 million.
Last year, net income rose to $106.3 million on $30.5 billion in premium revenue, and in the first quarter of this year, HCSC reported a profit of $869 million. Any profit after two years of deep losses is good news for the company. The champagne remains corked, though, considering that the profit last year was only about 10% of the profit HCSC generated in 2012, two years before the core parts of the ACA were implemented.
To steer HCSC back into the black, Steiner used a two-step approach. First, she raised premiums significantly, particularly on consumers enrolling on the ACA’s exchanges, to cover any losses among those who may be the sickest enrollees, according to published reports. In Texas, for example, premiums rose by 20%.
Second, as a veteran of the managed care industry (she’s a member of the board of America’s Health Insurance Plans), she knows that one way to reduce costs is to cut out costly providers. HCSC has developed narrow networks of hospitals and doctors, said published reports.
HCSC’s brightening financial outlook comeback isn’t unique among the Blues. For example, Blue Cross Blue Shield of Alabama had a profit of $81 million the first quarter of this year compared with a $50 million loss during the first quarter of 2016. But a caution about making too much of the first quarter result: Congress suspended the tax on health insurance under the ACA this year, and because insurers were required to book that payment in the first quarter in previous years, the numbers in 2017 look better. Also, because high-deductible plans have become so common, consumers shoulder more of the cost of care early in the year, saving insurers money.
Steiner is also steering HCSC in the direction many health insurers are going: shifting financial risk to providers by developing ACOs and managing patients with chronic disease more aggressively in an attempt to avoid expensive emergency room care and hospital stays.