By Francis M. Miller

As we get older, the telling of war stories becomes a sentimental way to reframe the past and see things in a new light. One of my favorite tall tales might apply to Kevin Patterson’s decision to take over as interim CEO of Connect for Health Colorado.

Francis M. Miller

In a time long ago, retiring CEOs would roll out the red carpet for the incoming executive and promise their undying support. But, when the person at the top has to depart under strained conditions, the custom is for the departing executive to leave three “letters” in the top desk drawer to provide guidance as future conditions dictate. My guess is that before too long, Patterson will seek counsel from the “letters.”

So let’s imagine what might be inside the envelopes.

Envelope #1 – The first letter will say: “Tell the board that our problems revolve around systems and technology. We need several million dollars to fix the problems before the next open enrollment begins in the fall.”

Now, since Connect for Health has always been a purchasing agent organization, it lacks internal staff who possess the requisite skills to do anything more than publish RFPs to vendors. So systems development will, by necessity, be farmed out. It is highly likely that it will also be sole-sourced to the same firms who caused the problems. Patterson has been down this yellow-brick road before. The State of Colorado was forced to hire  the same vendors it had paid millions to fix the troubled CBMS (Colorado Benefits Management System). It’s very difficult to change horses in mid-stream.

Fixes at the margins of a poorly designed system promise to achieve little. It can also become a case of focusing on the wrong problem. The exchange’s fundamental problem is that it lacks a viable business model and it has a high level of fixed costs. There is a danger that the exchange will come to be seen as a contributor to rising health care costs rather than part of the solution. Right now the exchange is being forced to levy fees on consumers while insurance companies are saving millions on brokerage commissions and residuals. How did that happen?

Without a turnaround of epic proportions, the detractors of the exchange will begin to clamor for it to be turned over to the federal government. At that point Patterson will likely retire to his office, pour himself a stiff one and reach for the second envelope.

Envelope #2 – The second envelope says: “Tell the board the exchange’s continuing problems stem from a  weak organization. It will take more people in the call center, and additional marketing outreach and advertising staff.”

In the final analysis, once the turn-around professional sprinkles fairy dust on the computer systems and the organization, there’s not much else that can be done, unless you control the creation of the insurance product itself. But the design and pricing of health insurance products is not within the scope of the exchange’s activities. Connect for Health Colorado has been positioned as a middleman peddling someone else’s product. It is forced to tease out a fee in the form of levies. The exchange holds the carrot and stick in the form of subsidies and mandates. If it ever ceases to monopolize the dispensing of the subsidies, its game over.

Eventually, Patterson will come to realize that when Connect for Health was created, it was created as a social experiment by politicians and insurance company lobbyists. These co-conspirators were people with an agenda to provide government-subsidized insurance to the individual markets. The politicians were pandering for votes and the insurance companies were seeking growth outside a rapidly mature group market tending toward self-insurance. Health industry providers and financial intermediaries have never been serious about reducing health care costs and they never will. The whole notion of exchanges was critical to carrying out the scheme because traditional consulting and brokerage distribution channels are only interested in the group market. They are wholesalers, not retailers.

Patterson has a proven track record that makes him perfectly suited to turning around the exchange. He is probably the last, best man to assume the helm of the ship and guide it through the Panama Canal. If he does so, he will have earned his salary. For the board and the legislature, supporting Patterson is an all-in chips-on-the table play.

We should not underestimate the difficulties Patterson will face in this endeavor. The same board and legislative committee that sat back and allowed all this to happen are still in place. Vested insurance industry and provider interests will continue to attempt to shape the form and function of the exchange like potter’s wet clay. And, there is always the possibility that Patty Fontneau and CIGNA – or other industry interests – are building their own Trojan Horse.

It is likely the exchange staff is desperate for leadership and structure. It has been lashed to the deck of a ship with waves washing over it in a big storm. But, without an operations manager and chief financial officer, the organization will not be able to pursue simultaneous events essential to achieving multiple outcomes in a time-compressed fashion. This turnaround cannot become a linear, one-step-at-a-time affair.

Being wrong in the selection of even one senior team member will cause internal strife and conflict at the top. If things do not go well, Patterson will likely seek the wisdom of the third letter. There is always a chance that his predecessors knew something none of us dared to imagine. What’s in that third letter?

Envelope #3 – The third letter simply says: “MAKE OUT THREE ENVELOPES!”

I realize there are those who will accuse me of being flippant. I have long concurred with community wisdom that the success of Colorado’s health exchange is key to the availability of affordable insurance to individuals, families and small business. However, I am far less concerned about those being enrolled in Medicaid. They should be able to do that without the exchange’s help. The working poor are being mandated under the penalty of tax fines and those who buy insurance are being given subsidies. This is like selling watermelons off the back of a truck.

What attracts my attention is the 400,000 small Colorado businesses who are the future of Colorado’s economy. From this pool will come the next generation of Coors, Gates and Lockheed Martin. If Connect for Health can’t sell dirt cheap insurance in the Medicaid and Individual markets without bungling the job, it will never make the program for small businesses successful. While the exchange is obsessively focused on creating good customer experiences for individuals and families, it, like all the exchanges nationally, has its work cut out for it to make that program work. I submit the Super Hero Award will be given to the first state that can really deliver affordable health insurance to small businesses.

Patterson, who got his start in parks and recreation and has masters degrees in public administration and systems, is not a heavy hitter when it comes to health care and insurance. That could be his Achilles Heel. He really needs partners as cornerstones in the organization’s foundation. Patterson has also managed his way through the morass of vendor delivery issues on past projects. That will come in handy. But, the exchange must eventually be capable of standing on its own in the systems area or the vendors will suck the blood out of them. They are experts at creating hostile co-dependency.

The board of directors and the legislature bear the ultimate responsibility for this debacle. Their self-serving, partisan bickering simply have to cease. I would suggest that they should purge the board of anyone who has insurance industry or health provider ties. Reduce the organization to people you would want to die with you at the Alamo.

It’s time to get tough, really, really tough.

Francis M. Miller is the past president of the Colorado Business Coalition for Health and the vice chairman of the Colorado Health Data Commission. He founded the first consumer cooperative for health care called the Alliance and is the current president of Health Smart Co-op. He blogs on www.thethoughtczar.com.