The Giants Are Awake and
They’re Hungry!
Rob Walling - Miller, Herbers, Lehmann
Steve Reynolds - Accident Fund Company
Debby Harden - Companion P & C
Agenda
• Rob - Blues Overview & Approaches to WC
• Steve - Product Development & Cross Selling
• Debby - Managed Care in Blues WC
They Might be Giants
• The importance of the Blue Cross and Blue
Shield licensees to healthcare around the world
is demonstrated by:
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Historical Role
Size
Brand Recognition (99%, 2nd only to Coca-Cola)
Geographic Expansion (Canada, Mexico, Uruguay,
Argentina, Western Europe, Australia, Israel)
Historical Roles of the Blues
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Blue Cross - 1st Prepaid Hospital Coverage
Blue Shield - 1st Prepaid Physicians Coverage
Many Plans had/have Community Responsibilities
51 Independent Licensees
BC/BS Association
– Controls rights to licenses
– Monitors quality and strength of licensees
– Oversees national programs (Blue Card Program,
Medicare, Federal Employees, IBM, United)
How Big is Big?
• 72.7 Million Insured Lives (Over 25%)
• 46.7 Million Insured Lives in MCOs
• Over $80 B in Revenues in 1997
• 150,000 Employees Nationwide
• Contracts with 90% of all Physicians
• Contracts with 80% of all Hospitals
...and Getting Bigger
• Consolidation is fueling larger Blues licensees
• Consolidation is being driven by
– Access to Capital
• Critical Mass
• Survival of the Fittest
– Geographic Expansion
Consolidation Examples Since 1993
• Wellpoint (CA, GA)
• Anthem (IN, OH, KY, CT, NH, ME, CO...)
• Highmark (PA BS, BC of Western PA,
Mountain State BCBS)
• The Regence Group (OR, ID, UT, parts of WA)
• Excellus (5 Blues in NY State)
• BCBSI (IL) and BCBS of Texas
• Wellmark (IA & SD)
• BCBS of Tennessee and Memphis
• BCBS of Maryland and the National Capital Area
Why get into WC
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Hillary Clinton
Network Volume = Negotiating Leverage
Network Pricing Advantage
24 Hour Coverage
Trend of WC Toward Employee Benefit
Multiple Bites of the Apple/Cross Selling
Why not get into WC
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Premium to Surplus
What’s a Tail?
Return to Work Motivation
Trust Factor
Data/Jargon Mismatch
Licensing Constraints
Health Care Results Constrain Expansion
Approaches Taken by Blues to WC
• Avoidance
– (Not many, Over 3/4 of Licensees have a network)
• Develop & Lease a WC Network
– (BCBSCT)
• Develop TPA Capabilities to go with Network
– CompSource (BCBSNJ)
– OHMS (BCBSCO)
Approaches Taken by Blues to WC
• Form a P&C Subsidiary
– Florida forms Comp Options
– Companion P&C
• Partner with a WC Writer
– United Wisconsin (with Aon)
– Third Coast (RisCorp and BCBS IL)
• Acquire a WC Writer
– BCBSM and Accident Fund Company
– Anthem and Shelby Insurance (Anthem P&C)
Accident Fund Company
• Founded in 1912 and the first provider of workers
compensation in Michigan
• Headquartered in Lansing, Michigan
• Offers traditional workers compensation insurance
and third party administration of self-insured
businesses and group programs.
• Purchased by Blue Cross Blue Shield of Michigan and
was one of the largest privatization’s of a public
agency in U.S. history.
Accident Fund Company Privatization
• The Privatization Motivation
 1976 A.G. rules that Accident Fund of Michigan is
a state agency.
 Legal battle begins that would last twelve years
 Governor John Engler calls for privatization open
the way for the sale.
Accident Fund Company Privatization
• The Sale Process
 Policyholders brought a lawsuit claiming that the
surplus belonged to them.
 Courts decided that the assets belonged to the
state.
 Investment banker solicits buyers including
BCBSM.
Accident Fund Company Privatization
• Blue Cross Blue Shield of Michigan and
Accident Fund Company
 National health care initiative could be successful.
 If successful assumed it would include non-occ
and occupational health care needs.
 Accident Fund of Michigan has largest market
share and made good investment sense.
Accident Fund Company Privatization
• The Privatization Process
 BCBS is the successful bidder and the sale is
closed January 1994.
 P.A. 350 is amended and limits the activities of the
Accident Fund of Michigan
 Accident Fund of Michigan changes its name to
Accident Fund Company.
What We Are Doing Today
• Twenty-four Hour Care
• Pharmacy Program
• Preferred Provider Organization of the
Midwest, (PPOM)
• Short term disability administration for
BCBS on a TPA basis
• Cross Marketing Health and Workers
Compensation Coverage
Twenty Four Hour Care
• Failure of The National Health Care
Initiative
• Lack of Understanding of 24 Hour Care
Challenges
• Increasing Agency Force Interest in 24
Hour Care Product
• Where we are now
Pharmacy Program
• Merck-Medco Managed Care
 Supplies drugs to BCBS pharmacy.
 Development of program was a direct result of the
BCBS relationship.
 Provide pharmacy usage information.
• The Program
 BCBS pharmacy only.
 No out of pocket costs to the worker.
 Covers only those drugs needed to treat the
occupational injury or illness.
Pharmacy Program
• Benefits
 No out of pocket costs for the employee.
 Administration fee for BCBS.
 Significant savings for Accident Fund Company.
BCBS and AFC Cross Marketing
Initiative
• Cross Marketing Concept Development
 Too soon for Twenty-four hour care.
 Cross marketing seen as an opportunity.
 Concept developed over a twelve month period.
• Product Development
 Initiative is made part of the annual business plan.
 Cross functional team is made responsible for
implementation.
 Developed three different types of strategies.
 Implemented October 1999.
BCBS and AFC Cross Marketing
Initiative
• Challenges




Education and Lexicon.
Culture differences.
Distribution systems.
Data.
BCBS and AFC Cross Marketing
Initiative
• Lesson Learned
 Needs to be of equal priority.
 Vertical differences in buy in.
 Both organizations understand each others
business much better.
 Still learning.
Next Steps
• Coordinated Product
• Focus on Employee Management and
Benefits
• BCBS Network Opportunities as we
Expand to Other States
• Cross Marketing Expansion
• Opportunities are Endless
Thank You
Steve Reynolds
Accident Fund Company
232 South Capitol Ave
Lansing MI 48901
(517) 367-1604
stevenr@accidentfund.com
The coordination of appropriate medical services
to assure the highest quality of care with the goal
of achieving maximum recovery and functionality
obtained in the most cost effective manner.
How it began……..
wHere it led….
+
=
Less
indemnity
BURN CENTER
MR. BARELY MAKINIT
1/3/53
222-55-9999
WASHER
$ 350.00
DRYER
$ 350.00
SHEETS
$ 100.00
HOME HEALTH
ROOM B
X 10 DAYS
SUPPLIES
$1,800.00 PER DAY
X10 DAYS = $18,000.00
$1,400.00
$ 100.00
$2,300.00
SAVES DOLLARS & SO MUCH MORE
P&T
$210,000.00
PROSTHETICS
$100,000.00
MEDICAL/REHAB $150,000.00
$460,000.00
AIRTRANSPORT $ 1,800.00
VS
CASE MNGT
$ 5,000.00
MEDICAL
$45,000.00
5 WKS TT
$ 2,100.00
$ 53,900.00