Welcome to the Aug. 8 Monday Business Briefing, your private business intelligence digest from Insider Louisville.

Feds: Some insurers thriving thanks to business gained on health exchanges

Mark Bertolini
Mark Bertolini

Health exchanges will continue to thrive despite the plans of some insurers to cut back participation, a government spokeswoman told IL.

Aetna and Humana said last week that they will offer health insurance plans through the exchanges in fewer states next year — and are weighing whether to cut back even more. The companies said in quarterly earnings reports that they expect to lose more than $600 million combined this year on customers gained through the exchanges, which were created by the Affordable Care Act, aka Obamacare.

Insurers say they have struggled because health exchange customers have tended to be sicker than expected, and the cost for their care has exceeded insurance premiums. Insurers and the ACA’s architects had hoped the higher-than-average costs for the pent-up health care demands of older and sicker patients who previously lacked health insurance would be offset by younger, healthier patients. However, while sicker people have signed up because they needed health care, healthier Americans have stayed away.

To help make up the difference, insurers have asked — and received approval — for significant health insurance rate hikes for next year.

Aetna CEO Mark Bertolini said last week that the company had struggled especially with the new patients’ prescription drug costs. The ACA’s mechanism that determines a patient’s risk for high health care costs excludes prescription drugs, which is a problem, Bertolini said.

HHS logoBut the U.S. Department of Health and Human Services told IL via email that it already has proposed changing the risk assessment mechanism. In June, the agency said it plans “to incorporate prescription drug utilization data that provide a more complete picture of enrollees’ health status.” It also said it would eliminate some enrollment periods to prevent people from signing up for health insurance only when they need care.

HHS said those actions will help “ensure that the program continues to work as intended to compensate issuers with higher-risk enrollees and thereby help issuers sustainably serve all types of consumers.”

Marjorie Connolly, the agency’s national press secretary, told IL via email that the HHS has “full confidence, backed by data, that the health insurance marketplace will continue to thrive for years ahead as a place where insurers compete for business and consumers have access to a range of affordable coverage options.”

Connolly also said the market has continued to grow and create major business opportunities for insurers — and that some companies are taking advantage of those opportunities faster than others.

“The ACA changed the nature of insurance market competition, from avoiding people with pre-existing conditions to competing on cost and quality. It’s no surprise that insurers are adapting to these changes at different rates,” Connolly said.

She also said that thanks to some insurers’ innovative strategies and the Obama administration’s actions to broaden the risk pool, consumers on the exchanges next year will have a “robust set of choices.”

“And over the long run, it’s consumers’ choices that will drive which insurers succeed in the marketplace and benefit from the growth opportunities it continues to create,” Connolly said. —Boris Ladwig

Baxter Avenue Theatres to add reclining seats and a bar

Look what we saw on Facebook!
Look what we saw on Facebook!

Yes, we were trolling on Facebook Friday afternoon, but look what we came across: Baxter Avenue Theatres is adding powered reclining seats in each of its theaters, as well as a full bar.

After collecting ourselves upon reading the announcement, we made a call to theater manager Bryan Senteney, who confirmed that this fall, renovations will be made to Baxter Avenue Theatres that include adding powered reclining chairs and a full bar to the Highlands movie theater complex.

“These are the last two pieces of the puzzle,” says Senteney, referring to the amenities that will join the theater’s recent upgrade of picture and sound quality.

He estimates the additions will cost a little under half-a-million dollars, and he plans to keep ticket prices about the same, possibly increasing by $1 at the most. Details are still being worked out, but Senteney hopes to begin the upgrades in late October, and a bit later for the bar since it may take a while to obtain a liquor license. —Sara Havens

Kindred shares jump on higher profit report

Kindred logoKindred Healthcare last week reported higher second-quarter profit on slightly higher revenues thanks in part to strong results in its rehab business.

The Louisville-based nursing and rehab hospital company said net income, at $23.8 million, rose 6.3 percent compared to the second quarter of last year.

Earnings per share, of 27 cents, were up 2 cents from a year ago.

The results beat Wall Street expectations, according to the Associated Press. On Friday, shares jumped 7.5 percent. Broader markets gained about 1 percent.

Kindred said second-quarter revenues rose about 0.5 percent to $1.8 billion.

Income from continuing operations before income taxes fell, but income taxes fell more, resulting in higher net income than a year ago.

Expenses rose 0.8 percent, to just under 1.8 billion. Expenses for salaries, wages and benefits fell slightly, but rose for rent, supplies and general administration. Litigation expenses, at $930,000, fell by about $3 million, or more than 76 percent. But the company also booked impairment charges of $6.1 million. It had no such charge a year ago.

Kindred also announced that a cash dividend of 12 cents per common share would be paid on Sept. 2 to shareholders of record as of Aug. 18. —Boris Ladwig

Humana inadvertently provided health insurance to drug traffickers

Federal authorities said Humana has violated the Foreign Narcotics Kingpin Designation Act by doing business with people who have ties to Mexican drug cartels.

Humana said the violation was inadvertent and noted that authorities did not impose any fines.

The Office of Foreign Assets Control (OFAC), the enforcement arm of the U.S. Department of the Treasury, said Humana, as the parent company of Kanawha Insurance Co., administered insurance policies for and collected insurance premiums from three people whom the feds had placed on the Specially Designated Nationals and Blocked Persons List.

The SDN lists individuals and companies controlled by or acting on behalf of targeted countries and includes individuals, groups and entities such as terrorists and narcotics traffickers, with whom Americans are generally prohibited from dealing.

Last week, OFAC said it had issued a Finding of Violation to Humana because Kanawha, from Jan. 2, 2010 to May 11, 2011, failed to identify and block policies and premium payments of Leopoldo Lopez Grayeb, Noemi Lopez Fernandez and Juan Manual Lopez Fernandez. According to the U.S. Embassy in Mexico, Grayeb had ties to the defunct Beltran Leyva drug cartel, a branch of the still-active Sinaloa Cartel, considered by U.S. intelligence experts as the world’s most powerful drug trafficking organization.

OFAC logoOFAC said Kanawha received and processed on behalf of an unaffiliated insurance company 34 premium payments totaling about $14,500 for policies held in the name of the three individuals.

The agency also said no Kanawha personnel appeared to have knowledge of the conduct that led to the violation, but the company “had reason to know that it was providing service to, and processing premium payments for or on behalf of three individuals on the SDN list.

“As a large and commercially sophisticated company … Kanawha failed to implement controls and measures to ensure it could identify, block and report insurance policies, premiums or claims payments relating to OFAC-sanctioned policyholders,” OFAC said.

Humana Spokesman Tom Noland told IL via email that when Humana acquired Kanawha, the company’s procedural  gaps resulted in inadvertent violations.

“Humana and Kanawha began working cooperatively with OFAC as soon as the matter came to their collective attention, and Kanawha has enhanced its policies and procedures to guard against any future transactions with blocked entities,” Noland said. “Humana takes compliance very seriously, and has worked to enhance its policies and procedures with respect to U.S. economic sanctions laws (as well as those of subsidiaries like Kanawha) in response to increasing risks in recent years.”

And, Noland said, “It is important to note that, while OFAC issued a finding of violation, it did not seek any penalty from Kanawha or Humana.”

If you want to make sure you’re not doing any business with blocked businesses or people, you can check the Specially Designated Nationals and Blocked Persons List here. —Boris Ladwig

Louisville ranks third most hospitable, sixth cheapest rent

airbnbLouisville loves a good accolade, and last week, it got two.

Airbnb and CondeNast ranked Louisville in the top 10 of Airbnb’s most hospitable cities, and Louisville also made the top 10 in a report by an apartment market data firm Yardi Matrix that looked at how much space renters can get in various cities for $1,500.

To find its top 10, Airbnb searched through thousands of reviews. The only two cities to beat Louisville were Phoenix and rival Nashville. One of the top hosts in Louisville is a man named Landon who works at Jefferson Community and Technical College, according to his Airbnb profile.

“Landon’s house is really a home,” one reviewer wrote. “He welcomes you with cookies and flowers. The house is fully stocked with everything you might have at home. He has thought of everything.”

And if people like Louisville enough to move here, they will find apartments to be relatively affordable. Of course, it depends on where they are moving from, but Louisville was ranked sixth out of the 30 most populous cities in terms of rent affordability, Yardi Matrix’s subsidiary RentCafé reported.

Renters can acquire a 1,648-square-foot apartment in Louisville for $1,500, while New Yorkers can only get 271 square feet for that price, the Yardi Matrix study showed. Memphis, Tenn. is the city where people can get the most for their money.

Researchers looked at the average apartment size and average rents at all multifamily rental properties with 50 or more units in each city to create its findings. It will be interesting to see if that ranking changes once numerous upscale apartments in the works in Louisville come online. —Caitlin Bowling

Highland Morning hosting grand opening for second location

The St. Matthews location opened on July 25. | Courtesy of Highland Morning

Although breakfast/lunch spot Highland Morning opened its St. Matthews store two weeks ago, is it really official without a ribbon-cutting?

Highland Morning St. Matthews, located at111 St. Matthews Ave., will hold its grand opening at 10 a.m. Wednesday, Aug. 10.

Its regular hours of operation are 8 a.m to 4 p.m. Monday through Friday and 8 a.m. to 3 p.m. Saturday and Sunday. The menu includes the same favorites as the original Highland Morning on Bardstown Road, including biscuits and gravy, Dutch apple pie waffles, crab cake Benedict and “Kentucky’s Pick Three” omelets with skillet potatoes.

The average check ranges from $8 to $15 per person.

IL reported in June that the business was expanding into St. Matthews. “We really wanted to find another location that had a distinct identity to the neighborhood, and we really feel we will fit in and bring a value to the neighborhood of St. Matthews,” Michael Coe, who manages the restaurant, said then. —Caitlin Bowling

New outdoors store opening at The Paddock Shops

Water + Oak Outdoor Co. will carry brands such as Filson, Frye, Sorel, Southern Marsh, YETI, Marmot, Black Diamond and Osprey.| Courtesy of StyleBlueprint
Water + Oak Outdoor Co. will carry brands such as Filson, Frye, Sorel, Southern Marsh, YETI, Marmot, Black Diamond and Osprey.| Courtesy of StyleBlueprint

Filling a hole left by locally owned Quest Outdoors when it consolidated on Shelbyville Road, a new outdoor gear store is preparing to open in The Paddock Shops.

Water + Oak Outdoor Co. is set to debut Aug. 11 with four days of grand opening specials, including raffles, free gifts with purchase and charity donations. Find out more information about those here.

The store will carry brands including Filson, Frye, Sorel, Patagonia, Southern Marsh, YETI, Chaco, Lucy Activewear, Marmot, Black Diamond, The North Face, Osprey and Vineyard Vines.

Water + Oak also is hiring part-time employees, according to its website. Applicants must have at least one year of retail experience and be able to lift up to 50 pounds. Those interested should send a cover letter and résumé to [email protected].

IL reached out to the store’s owner(s) via Facebook but did not hear back by publication time. —Caitlin Bowling

Louisville Grows seeks to Kickstart a tractor for Hope Community Farm

Screen Shot 2016-08-05 at 12.24.51 PM

Hope Community Farm is a 7-acre training farm and community garden in the Iroquois neighborhood that provides 45 refugees from Central Africa an opportunity to learn how to adapt their African farming skills to the Kentucky climate while earning income, improving their English and developing friendships. The site was developed by Louisville Grows and Gate of Hope Ministries International, a refugee resettlement organization.

Currently they use a walk-behind tractor, but a number of the farmers are in their golden years and Louisville Grows wants to help them continue to farm by providing them with a used tractor. They have set up a Kickstarter campaign to allow people to contribute. They’re seeking $12,000.

There are 10 people in the farm training program and 35 people who use the community garden, providing food for their families and the community. There is a waiting list for both programs.

Hope Community Farm has a limited CSA available. Applications are closed for 2016. Also, Save-A-Lot on Taylor Boulevard has started carrying Hope Community Farms produce within the store, specifically garlic and squash. –Melissa Chipman

In other Kickstarter news …

Ben Aroh's coasters
Ben Aroh’s coasters

Two other Louisville Kickstarter campaigns are doing quite well.

Craftsman Ben Aroh has more than a dozen days left in his Kickstarter but already has surpassed his $4,000 goal. The Leather States of America reimagines his wildly successful keyholders, the Wooden States of America, in coaster form. This is Aroh’s fourth Kickstarter campaign.

Watch the video: So earnest. Big cuddly Golden Retriever. Take my money.

Aroh’s also funny. Note his take on “the Skinny States”: “A quick word about the “skinny” states (California, Tennessee, Delaware, Massachusetts, etc.). Obviously, we did not want to leave anyone out. That being said, you may find some state shapes just don’t work out very well as coasters. Florida, we all love your beautiful beaches and incredible bass fishing, but you make an awkwardly narrow coaster. Is it possible to set a drink on the Florida coaster? Yes. Does it look awesome? Yes. Does it work very well as a coaster? Eh, not really.”

Also on Kickstarter is Paula Blankenship with her Nod Pod travel pillow. You strap it to the headrest of your car or airplane seat, tuck the cushion under your chin, and it keeps your head straight and stationary at a 90-degree angle to your shoulders.

Tell me why no one has come up with that before.

There’s also a travel blanket developed by Blankenship called the Pod; it looks like a Snuggy or Slanket with a hood. —Melissa Chipman

Nonprofits can apply to profit from Encore Louisville and Ignite Louisville teams’ expertise

Louisville-LeadershipIs there a nonprofit in your life that could use a team of people to tackle a particular project? Leadership Louisville’s Ignite Louisville and Encore Louisville teams are looking to solve your operations, productivity, community outreach and strategic focus problems.

These two leadership programs provide outside thinkers to help nonprofits move projects or challenges forward. Ignite Louisville teams invest hundreds of hours in their nonprofits — work that has an average value of $30,000. Encore Louisville teams are made up of retired or experienced members and they bring decades of experience and leadership to a series of meetings, according to the news release, “helping nonprofits develop action plans over a two to three month timeframe, spending 15-20 consultant hours with their nonprofit partner.”

A workshop for nonprofits planning to apply is scheduled on Friday, Aug. 12, from 9-10 a.m. at the Leadership Louisville Center, 732 W. Main St.  All interested nonprofit representatives are welcome to attend. Please RSVP to Jo Lloyd-Triplet at [email protected] Proposals are due Sept. 7. For more information, visit the Leadership Louisville page. —Melissa Chipman

Copper & Kings nabs more national attention, this time for co-founder Joe Heron

Joe Heron in Forbes
Joe Heron in Forbes

In this month’s edition of Entrepreneur magazine, you’ll recognize a familiar face. Joe Heron, co-founder of Copper & Kings American Brandy in Butchertown, is featured in an article about artisans who made it. Writer Matt McCue profiles several “microenterprises” that have succeeded by emphasizing small-batch, artisan goods. He credit’s Heron’s savvy distribution strategy and business instincts for his success.

And in Forbes, an article on Heron begins with, “Joe Heron must be nuts.” Writer John McCarthy talks with him about the past, present and future of his brandy, as well as Heron’s love of rock ‘n’ roll and how that shapes the distillery experience.

Both are great reads on a cool dude doing big things in Louisville. —Sara Havens


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