Ken Lewis Heads FirstCarolinaCare

This is the second in a weekly series of interviews with health-care professionals in the area who offer differing perspectives on the debate over health-care reform.

The current health-care legislation making its way through Congress doesn't address the three major criteria it was designed to, according to Ken Lewis.

Lewis is president of FirstCarolinaCare, an insurance arm of locally based FirstHealth of the Carolinas that serves more than 13,000 members.

Lewis said in an interview that the bill is supposed to cover the uninsured, improve the quality of care and bend or lower the cost curve, but in actuality it does none of those things.

He opposes the legislation, adding that he doesn't see a "tremendous benefit" for the community. He also calls the public option provision a "poor proposal."

Instead of revamping the entire system, Lewis favors a more pragmatic approach that would begin with fixing Medicare and Medicaid. He thinks passing a bill just for the sake of passing it isn't a good idea.

Lewis spoke with staff writer John Krahnert. Here is an edited transcript of the recorded interview.

Q: Could you tell our readers a little bit about your background?

A: Almost 20 years in the health insurance industry. Prior to that, another 15 years or thereabouts in the hospital health-care industry. Bachelor's degree in accounting and came up through the ranks. Essentially, I've been in health care and health-care-related fields almost my entire business career.

I've been here 11 years. I was recruited here to start the health plan (FirstCarolina-Care), and it has been a great experience with a great organization.

Q: Health-care reform is the big issue right now that everyone's talking about. In your opinion, what's wrong with the current system, if anything?

A: I think the conventional wisdom would say we need reform. There's probably no doubt about that. The level of reform and the type of reform is really the issue.

The payment system -- do we pay for sick, do we pay for well, do we pay for episodes of care? I think those are the critical issues. Do we allow people to fall between the cracks on employer-based coverage, or is insurance coverage about employers paying, as it has been since World War II?

The bigger issue in this is what the current bill is supposed to be doing and what it accomplishes. So to start with, it's not a health-care-reform bill, it's a health-insurance-reform bill, as opposed to what it was about three months ago, which was about health-care reform. There's a definite separation between those two types of reform.

The bill itself today, I would say, was set out to cover the uninsured, improve the quality of care, and bend or lower the cost curve. I believe the bill as it is written now does none of those three things. I think that's really the bigger issue.

Q: In your opinion, what are the key elements of health-care reform or health-insurance reform? What has to be part of the legislation for it to work?

A: I think those three items are key to it. You have to look at the cost drivers, and in insurance, we buy services and we project a cost.

Let me back up and talk about normal business, regular businesses, if you will. When they look at their products and services, they look at the cost of what they're buying, and to some extent, they control that. They look at inflationary factors when they set a budget for the following year, and the combination of what those costs are, or what they buy, how much they buy and those inflationary factors drive their budget.

In insurance, we do much the same thing, but we are driven when we set our budget, we have to project out for other people what those costs are. So we multiply the cost of what we buy times the projection in utilization -- the number of things that are purchased. That drives what looks like a much higher cost curve than in normal business. So our inflationary factors have been two and sometimes three times what they are in normal business.

In order to solve the issue, to go back to the question you asked, you have to look at those costs. And it's much tougher to look at those costs and much more difficult to deal with, because they deal with what individuals in our society want -- not always what they need, but what they want. And that's what American society is really about.

When people ask me the drivers, I tell them to look in the mirror. They want a healthier life. They want a longer life. They want a better quality of life. And having said that, they want to make sure that somebody has to pay for that.

I use Lipitor as my prime example. About 50 percent of men over 50 use Lipitor, or at least it's recommended. That's at a cost. That's at a huge cost. But they utilize it because the doctor has said it's going to reduce your incidence of heart attacks. That comes at a cost.

We all want the technology. We all want the things that make us healthier and have that longer and healthier life.

Q: A controversial part of the House bill is the "public option." Will the public option put insurance companies like yours out of business? Does it create a slippery slope?

A: It's problematic. So let me first say, because I'm an insurance company, let me make this statement: If this plan is no longer effective for this community, that's OK. We were put in place to be an effective resource for our region, for our community. And if it goes away because something better replaces it, that's fine.

As to the public option, insurance is about balance, and part of that balance is what an insurance company does and how they're regulated. We're a very highly regulated industry -- the Department of Insurance on the state level, the Department of Labor on the federal level. And that creates a balance for us. It does not allow the insurer to go too far in one direction without giving the consumer an opportunity and both the insurer and the consumer some guidelines for how to act and react -- appeals and whatnot.

When you give one group, including the government, both the operational authority as well as the regulatory oversight, they tend not to balance themselves out. To use the old term, power corrupts and total power corrupts totally, that's what happens. And that's what I see happening in a public option.

I think it's a poor proposal for those reasons.

Q: So it's fair to say you're opposed to this current legislation?

A: I'm opposed to what's being proposed on the Hill right now, absolutely. It's as easy as that. I'm opposed to it. It doesn't do what it is supposed to do. Again, you have to go back to those three criteria. It doesn't accomplish those.

So I see no benefit, no tremendous benefit for the community as I look at it.

Q: What's not being talked about enough? What's flying under the radar that people aren't discussing?

A: Lots of people talk about Medicare as being the ideal. And yet, Medicare -- I talked about the issue of total power -- Medicare is a public-run option. People say it works great, except it doesn't have a very good appeals process in comparison to the commercial appeals process that the regulators have put into effect. It doesn't provide for prevention and wellness. It has, for its existence, been behind the curve of technology in that regard and changes in society.

And lastly, it's projected to go bankrupt in 2017. Now, when you add all those together, it says the government didn't really do as good a job as people would like to say they've done on Medicare. Great program for those who are in it. It's a great program from various aspects. It pays on time. It has a set of benefits. It's laid out. It's reasonably understandable.

But that's why people buy supplements and other pieces that go with Medicare, because it doesn't do everything it needs to do. We implemented a Part D to it because it didn't have a drug aspect, and that's an important aspect now. Again, it's not the panacea, and if we're going to fix a program first, I'd say let's fix Medicare and let's fix Medicaid. We have that opportunity. Let's fix both of those.

If those fixes work, then we're gung ho for the public option.

Q: If you were health czar for a day, what kind of health system would you endorse? For example, Dr. Lori Heim (interviewed last week) said she thought a single-payer system offers the most cost savings, even though it may not be a political reality today.

A: Given those caveats I just gave you, which were, when you show me it works somewhere else, and we have two huge plans that we could see it in, then let's put the public option or the single-payer system to work. But let's do those [Medicare and Medicaid] first.

If I were the czar for the day -- fix some of the things that we can fix, not worry about implementing a whole new plan. But let's fix some of the things that we can fix.

The people who fall through the system because they lose coverage under an employer-based plan. The government, in fact, has done some of that with the stimulus.

They put in a program that pays a portion of the COBRA premium for people when they leave their employer or lose their coverage through their employer. In doing that, they've encouraged more people to take it. People tend to get sticker shock when they realize how much their employer has paid for a system. So we can fix that. We can focus on that.

We can focus on the quality issues in terms of health outcomes and we focus on that with the health-care industry, not the health-insurance industry. We can focus on technology in both the health-care industry and the health-insurance industry.

Lastly would be tort reform. I think Sen. [Harry] Reid said that it was only worth $50 billion. OK. I'll take the $50 billion, and let's work on tort reform, because I think it has a multiplier effect.

When you work on those issues, and when you get all the right people in the room, I think you can solve those issues. They are a basis for bending that cost curve, and you start that process of bending the cost curve.

So those are the things that I would work on, as opposed to "let's change everything that we have."

Q: Anything else you'd like to add?

A: I guess we should never lose focus of what our goal is, and we should never pass a bill just for the sake of passing a bill.

I think that [White House Chief of Staff] Rahm Emmanuel said the goal is to pass a bill through Congress, not to figure out what the ideal bill might be. I think that's not what most of the American people think. They believe that when you pass a bill, it should be as close to ideal as possible.

The last piece that you haven't asked me about is, what's FirstCarolinaCare about?

Lots of people do not recognize that in addition to being a subsidiary, an arm of FirstHealth, we have since our foundation operated under a number of strategic goals and missions.

One was to provide choice to our small business community. The second -- and very importantly to the business community, small or large -- is to give them predictability in premiums, which we have.

The third and fourth came about later on, and that was to improve the health status of our community, which we do with our nurses differently than other plans, because we send them out to our employers.

And lastly was to cover the uninsured, which we've done very well by one, providing that predictability -- our average increase has been about 7 percent over the last five years, not 11 and 13 and 15, but 7 percent over the last five years -- and by providing a program that encourages businesses to include all of their employees and does provide some subsidies to the lower wage folks for becoming part of the program.

So that's what we're about. We've mastered the process of not increasing our profitability. We've capped our profitability at less than half of what the industry average is, so we've capped our profitability at about 1.5 percent. The year that we exceeded that we returned it to our clients.

The last piece that I'll throw out: Our profitability is still less than what the state and federal government take in taxes from us. We said the profitability cap was 1.5 percent. The state takes 1.9 percent in a premium tax, essentially a sales tax, and then the federal government gets 34 percent of whatever profits we have, which account for about another point in our revenues.