CEO Confronts Arkansas Blue Cross’ Historic Loss Amid Health Care Crisis

Curtis Barnett is the president and CEO of Arkansas Blue Cross & Blue Shield. He’s navigating a funding crisis in the health care and insurance industries. (Karen E. Segrave)

After Arkansas Blue Cross & Blue Shield’s worst financial loss ever and forecasts of more red ink this year, President and CEO Curtis Barnett is facing an inflection point in the health industry head-on.

“It’s a moment of great promise, but it’s also a moment of great peril,” Barnett said in an interview earlier this month. “And if you think about the affordability crisis that we’re all facing right now, it feels like it’s more the latter than it is the former.”

ABCBS has been a mainstay in Arkansas health care for 77 years. After a $226.2 million loss in 2024, Barnett is expecting a smaller loss in 2025.

The nonprofit health insurer moved from No. 1 last year to No. 2 this year on Arkansas Business’ annual list of the state’s largest private companies ranked by revenue.

Barnett sat down with Arkansas Business in his company’s conference room to discuss industry challenges. He wouldn’t say how much of a loss he’s expecting this year, but he expressed confidence in the company’s current situation.

He is prepared to confront an era of uncertainty in government-funded health care with improvements and new products.

Hospitals across the state are reporting losing money. Thirty-eight of the state’s 95 largest hospitals reported losses in 2023, according to the most recent cost reports available from the Centers for Medicare & Medicaid Services.

Meanwhile, insurance companies are also under pressure. U.S. health insurers saw a 14.1% drop in net income in the first half of 2024 compared with the same period in 2023, a decrease linked to a 7% increase in hospital and medical expenses.

“We’ve got to look at how we pay for health care,” Barnett said. “These cost pressures are just going to continue to intensify going forward, if we don’t make some changes.”

Barnett’s biggest fear is that a single-payer government system might emerge.

“And when I talk to providers of care, that’s kind of the last thing that they want,” he said.

Providers say they must have more money from private insurance companies to offset the lower payments they receive from Medicare and Medicaid payers. But that’s not fair to the patients with private insurance, he said.

“We can’t cost-shift to the commercial market,” Barnett said. “If we do that, then we run the risk of blowing up that market as well. And if we can recognize that the federal government and the state government struggle to pay for the cost of health care, then we need to recognize that families and businesses do too.”

Arkansas Blue Cross & Blue Shield 2020-2004Arkansas Blue Cross & Blue Shield 2020-2004

(NA: Not available; Source: Arkansas Blue Cross & Blue Shield)

Costs Soaring

Last year, ABCBS had 125 small groups “abandon coverage completely because they couldn’t afford the cost,” Barnett said. “And if we continue to ramp up the pressure on the group market, on the commercial markets, that’s only going to get worse going forward.”

Meanwhile, patients have flocked to hospitals and doctors, driving up eye-popping bills in some cases.

ABCBS reported a 15% increase in claims exceeding $1 million in 2024.

“What’s alarming about that is… the age of the people who are having these high-dollar claims,” Barnett said. ABCBS is seeing more people under the age of 40 generate those seven-figure claims, “much more than what we’ve ever seen before,” he said.

Costly elective procedures are being used more too. Barnett said 37% more joint replacement surgeries were performed in 2024 than in 2019, the year before the pandemic.

Behavioral health conditions, mental health and addiction treatment services are up 50% in 2024 compared to what they were in 2019, he said.

The health care industry has known there’s been a lot of under-diagnosed and under-treated cases, “but you’re really starting to see those now begin to be treated in a much more meaningful way than what we’ve seen previously, which is helping to drive the cost,” he said.

Pharmaceutical Reform

Reforming the pharmaceutical industry is one way to curb health care costs, Barnett said.

“Right now, you have the pharmaceutical manufacturers that can set the price for a drug, they can make semi-annual adjustments,” he said. “They can invest billions of dollars to drive, through direct-to-consumer advertising … demand for that drug, and it puts the rest of the system at a tremendous disadvantage when they do that.”

As a result, patients are using expensive medications — especially specialty drugs – which are administered in a clinic or hospital for cancer or rheumatoid arthritis, he said.

He said the federal government needs to “get involved to bring a more rational way of setting drug prices,” Barnett said.

Last week, President Donald Trump set a 30-day deadline for prescription drug manufacturers to lower prescription drug prices voluntarily or face the possibility of reduced payments from Medicare and other government programs.

Prioritizing preventive care is also an area of potential savings, so “we’re not paying for these catastrophic cases on the back end.”

“We’ve kind of lost some momentum over the last few years,” he said. “I think the pandemic played a big role in that. But we’ve got to get back to that.”

Additional Challenges

Another challenge for Arkansas Blue Cross is the uncertain future of the Arkansas Health & Opportunity for Me program, called ARHOME. Originally referred to as “the private option,” this program primarily uses federal Medicaid money to buy private health insurance — mainly from ABCBS — for low-income Arkansans who earn too much for traditional Medicaid.

The state of Arkansas is seeking federal permission to impose a work requirement for “all able-bodied, working-age recipients of Arkansas’ Medicaid expansion program,” according to a news release from Gov. Sarah Huckabee Sanders earlier this year. The new requirement could reduce the number of people insured through ARHOME, and that could reduce ABCBS’s revenue from the state.

Meanwhile, Congress is examining enhanced tax credits for health insurance bought through marketplaces. The current credits are set to expire at the end of the year.

Before the tax credits went into place, about 90,000 Arkansans enrolled in the Affordable Care Act individual marketplace, Barnett said. Now, about 170,000 Arkansas are enrolled in the marketplace.

“Those enhanced tax credits have played an important role” in expanding the number of people insured through the ACA marketplace, Barnett said. “There’s no question about that.”

And if the tax credits aren’t extended, some people might drop their health insurance, he said. But that won’t mean they don’t need medical services — “and that has a ripple effect through the entire health care system,” Barnett said.

New Products

In 2024, ABCBS launched a product called Celeste, an all-in-one app that packages together navigation support for members, care management programs and interventions for people who have specific diagnoses, like diabetes. Celeste also provides support for wellbeing and fitness, weight loss and women’s health.

The product is designed to make it easier for patients to navigate the health care system.

The program starts with patients’ primary care physician, but if they’re needing a specialist, Celeste will help them locate one. The service also will help them make appointments with specialists and then have Celeste’s care management team follow that patient to make sure the person is getting the needed care to be healthy.

Barnett said ABCBS also is working to make sure patients follow doctors’ orders, as not all patients do, and take their prescription drugs as prescribed.

In addition, some people avoid check-ups with doctors and don’t do the follow-up that’s ordered.

“Just changing that entire mindset is a big challenge that we have in our state,” he said. “It’s one that we work to try to address as well.

“But if we don’t make some progress there, then our future is going to continue to be pretty challenged,” he said.

ABCBS also is investing and doing more to grow its national account business, and is working to take its “expertise to more potential national accounts or large accounts that may or may not be located inside the state of Arkansas as well,” he said.

It also has developed a new suite of small group products “that we’re taking to the market for Jan. 1 of this next year to help, again, just to make sure that we are as competitive as we can be, and grow that market as well,” Barnett said.

One area ABCBS doesn’t want to change is its brand.

An independent firm study shows ABCBS has some of the highest net promoter scores in its industry and across the country, he said. A net promoter score asks people to rank how likely they are to recommend a company or product to others.

“And then finally, our employee engagement scores continue to perform in probably the top 10% of employers nationally,” Barnett said of the scores that measure how motivated and enthusiastic workers are about their company. “So those are things that we don’t have to turn around. So that’s a great foundation for our company as we look toward the future, and we work through these financial challenges.”