For the CFO of a health-insurance company these are heady times indeed. Count the ways.
There’s taking on the risk of participating in the public exchanges created under the Affordable Care Act that are now (if quite shakily) available to consumers. Health insurers are also now forced to make assumptions for purposes of financial planning and forecasts based on massive government programs they’ve never before had to factor in. Another major consideration is staying current in an environment where business is transferring from group health plans to retail plans, a trend that’s likely to not only continue but to accelerate.
Failure to act with foresight and determination could be fatal. “If we stayed on the path that’s been successful for us, we might find ourselves irrelevant in two or three years,” says Ken Avner, finance chief at Health Care Service Corp.
HCSC is the largest “mutual legal reserve” heath insurance company — i.e., a nonprofit insurer owned by its policyholders — in the United States. The company, which operates the Blue Cross Blue Shield businesses in Illinois, Texas, New Mexico, Montana and Oklahoma, says it uses its earnings to support its financial stability, provide members with high service levels and broad medical-provider networks, and temper rate increases.
Avner is now completing his third year as finance chief at HCSC, where he’s worked for 27 years. Until he became CFO he was a career actuary. In the fall of 2010, when he was the firm’s chief actuary, HCSC’s CFO retired and the company decided to merge its finance and actuarial departments, with Avner leading the combined unit.
Avner recently spoke with CFO about the impact of health-care reform, his role and his efforts to make HCSC a less-conservative company. An edited transcript of the discussion follows.
After an actuarial career, were you prepared to take over finance for such a large company?
It’s not like I have no accounting background. One of the requirements for an actuary is that you have a certain amount of insurance-accounting education. Also, I come from a family of CPAs. I did a lot of hanging around with accountants growing up. And I have an excellent accounting staff.
Our CEO felt we weren’t taking advantage of some synergies that we could have, and also that because we’re entering a chaotic couple of years with the Affordable Care Act, it would be useful to get finance and actuarial more closely integrated.