PROVIDENCE – “Sur-prise, sur-prise, sur-prise!” as the TV character Gomer Pyle often exclaimed, talking about things that were not surprising. Clay Pell is running for governor.

If you missed the tweets, the YouTube video, the one-on-one orchestrated interview with AP [You have to love the story’s headline in The Boston Globe, “Husband of Michelle Kwan to run for R.I. governor.”], there was the actual rally at the R.I. Convention Center on Jan. 28. And, if you couldn’t be there, there’s a new Facebook campaign, “Stand with Clay.”

That morning’s more surprising, revelatory news, however, occurred at Temple Beth-El, at the Health Insurance Small Employer Taskforce meeting, as part of a panel discussion featuring executives from the four health insurers that offer commercial health plans in Rhode Island.

In the midst of a ho-hum sales pitch by the insurers, saying how they were really on the side of small businesses in attempting to lower costs, Stephen Farrell, president and CEO of UnitedHealthcare of New England, dropped an astonishing bombshell: the for-profit health insurer is planning to open its own private exchange for businesses and their employees in Rhode Island in the second quarter, in direct competition with HealthSourceRI.

A visibly angry Christine Ferguson, executive director of HealthSourceRI, hearing the news about UnitedHealthcare’s plans for the first time, responded with an impassioned, off-the-cuff, 10-minute response to Farrell, drawing sustained applause from the more than 60 small business owners and representatives in attendance.

Only ConvergenceRI was there to report on it – in part because the news media was drawn, moth-like, to the made-for-politics Pell announcement.

Small business owners don’t buy insurers’ sales pitch
Equally newsworthy was the question posed by Ann Borges, a small business owner of an accounting firm, The Scorekeepers, followed by the tongue-tied inability of the health insurance executives to answer it.

Borges cut right to the chase: she said she was very disappointed after listening to Farrell, Mike Hudson, chief operating officer at Blue Cross & Blue Shield of Rhode Island, Brenda Whittle, vice president of Neighborhood Health Plan of Rhode Island, and Thomas Croswell, president and COO of Tufts Health Plan. All she had heard, she said, was a glorified sales pitch for their products – without any real answers on controlling costs – what she described to ConvergenceRI in an interview after the discussion as “blooey.”

She said she found it hard to believe that the insurers would attempt to blame the latest round of rising costs on Obamacare.

Borges had just gotten her renewal for her insurance policy, and her rate had gone up 51.3 percent. “How was that possible? Can you explain why?” she asked Blue Cross’s Hudson, as he and the other health insurance executives squirmed in their seats.

Hudson, straight-faced, said he didn’t know. He once again attempted to blame the increases on the new fees and taxes under “Obamacare.” Tuft’s Croswell, beginning by saying he usually didn’t come to the defense of Blue Cross, put the blame not just on Obamacare but on hospitals, saying that the insurers could only pass on the rising costs of medical care. “Ask the hospitals,” he urged the small businesses in attendance, at a future session planned in about six weeks.

Steve Boyle, president of the Cranston Chamber of Commerce, expressed his disappointment at what he heard from the insurers, saying that there didn’t appear to be any sense of urgency on their part. He called the session, much as past sessions, part of a recurring nightmare similar to that in the movie “Groundhog Day,” with small businesses complaining over and over about health insurance rate hikes that were strangling their businesses, to no avail.

Then Ferguson came to the podium, surprised and angry about UnitedHealthcare’s announcement about the launch of a private exchange in Rhode Island. What she said cut to the heart of the issue. A full transcript follows below.

Speaking truth to power
“I’ve been in this for 30 years,” Ferguson began, and spotting ConvergenceRI in the audience, aware that she was about to go off-message, added: “You’re recording this, and you’re going to get me in trouble, Richard.”

“I could push a button," she continued, "and I could hear the same theme every single year for the last 30 years. When I started, health care costs were 7 percent of GDP. I sat in a room with a bunch of United States senators and a President, talking about how that was completely unsustainable, and if we didn’t get it down to 6 percent, the economy was going to go bust.

“It’s 17 percent [today]. I could push a button, and you could [hear] exactly the same things that were said today.”

“The reason I’m here, and not some place else in the world right now doing health care, is because this is the single biggest opportunity that we’ve ever had in the this country to make the change.”

“The single biggest. Because the window is two to three years. And then it will close. And it will be another 70 years before it gets done.

“From my perspective, if we don’t use this for our advantage in Rhode Island now, we’ve missed the boat.

“There is some confusion about the way that people think about the exchange. There are two exchanges. In effect, there is an exchange that deals with individuals; those individuals get tax credits [to help pay for their health insurance] because they do not have access to affordable employer-based coverage.

“That’s the individual side. That’s what you’re hearing about nationally, all the eligibility [problems about enrolling], all that stuff.

“The other [exchange in Rhode Island] is a small business exchange [with Full Employee Choice]. We’ve invested and continued to invest a lot of time and energy to support leverage for change that is really going to exist.

“My first reaction, when [Stephen Farrell] was talking, was: ‘What the hell?’

“The competition is about small businesses; it’s about whether or not we can convince you that there is an advantage to being in small groups and leveraging [the buying power] with providers and carriers. Or whether staying with one carrier is the best way to go.”

Imitation is the highest form of flattery. I thank you, [Stephen], for doing what you’re doing, it’s a wonderful affirmation of proof of concept.

Let’s be clear. Any question about the model that we have chosen for small businesses – of choice, at the employees’ level – should be put to bed now.

“One of the largest for-profit health insurers in the nation, [UnitedHealthcare], [they've chosen] exactly the same model. And, the reason they’re doing it, let’s be clear, is to keep all of the employers in one [insurance] carrier.

“On the exchange, you can choose Blue Cross, Neighborhood and United – and next year, Tufts.

“[On the UnitedHealthcare exchange], the only option is with United, the only option given to employer [and employees] is within United.”

“So, any ability that we now have to use competition by allowing consumers to choose goes out the window. OK?

“Let’s be clear. It’s a strategy that makes sense for their perspective – if they want to keep market share.

“What we want to do is open up the options, and to drive, from a consumer and provider perspective, competition.”

Access and transparency of data
Ferguson shifted gears, making a elliptical leap to the importance of the transparency of data in HealthSourceRI’s approach, compared to a for-profit or commercial insurer. “The data and information we can get and use, the date and information that is available [to employers and employees and customers] to help choose carriers and provider networks, that’s not proprietary; it’s transparent. It’s information that we don’t get to choose about how it goes out or whether it goes out.

“Right now, the accountability for costs, the accountability for carriers, is all about the regulatory system. Regulatory systems are inherently reactive. That is how [they work]. We regulate when there is a problem and we regulate in many ways by consensus.

“In terms of enforcing those regulations, we have a phenomenal Office of the Health Insurance Commissioner – the only one in the country – and they regulate really well. But when they regulate there’s a lag time. It’s not in real market, real time.

“When you’re looking at real competition and contracting and the other kinds of things that the exchange can do [to lower prices], that’s faster. We can turn things around faster than using the regulatory process. That’s the difference between us and the rest of the world. The exchange allows for participation actively of business, consumers and employers. They are provided information in a neutral way.

“We provide the information and tools [to make decisions] in a neutral, transparent way. The information is neutral, transparent, with accountability. HealthSourceRI is not geared toward one carrier, or one plan. We want the insurance carriers to compete based on their ability to provide [lower cost, higher quality] plans.

“Finally, the single most important thing, and the thing that bothers me about payment reform, particularly from a physician’s and provider perspective, is that you can’t expect a group of physicians to go in and have negotiations with an 800 pound gorilla with no tools, no information, [in order to] practice the way they want to practice.

“You can’t expect [these changes] to happen [unless] the consumer and provider are linked up in terms of a more holistic way of approaching this.

“We created the problem; the problem is in government and on the [insurance] carrier side in terms of how we pay. We can’t keep on saying it’s all the providers’ fault.

“The tools that we are creating over time [at HealthSourceRI] are going to allow for a partnership between providers and consumers and carriers to evolve to a place that is much more productive.

“We have a chance to do it. I need every single small business in this room, every small business that you have as an accounting customer [addressing Borges]. Employer choice is the single most important thing we can do right now to manage costs in the years to come.

“If you don’t do it now, if you’re not an early adopter, we are all going to be here in three years. You will be here, I will not. We need change.”

The response
The crowd, which had been polite but subdued while listening to the health insurance executives, erupted with applause, cheering Ferguson’s remarks.

After the meeting, Ferguson and Farrell talked, and actually hugged, giving the appearance that they “kissed and made up” in public.

Steven Shuster and Hannah Wojcik, of Brewster & Shuster, a Rhode Island insurance brokerage firm, rushed up to Ferguson to say how excited they were about HealthSourceRI, to say that they had been able to save their clients lots of money through the full employee choice program.

A doctor, in private practice, also came up to Feguson, to let her know that he had saved thousands of dollars as a result of purchasing health insurance through the exchange.

Meanwhile, Blue Cross’s Hudson met briefly with Borges. Borges, who works with a number of small business customers that are also experiencing huge rate increases, asked Hudson if Blue Cross could provide more specific information about the reasons for the increases, showing how the numbers were broken down.

Hudson, according to Borges, told her that he did not know how Blue Cross was making the calculations for individual employee benefits for small businesses.

“Shame on him for not knowing,” Borges told ConvergenceRI, in an interview the next day.