HCSC CEO McCaskey Is Highest-Paid Exec Among

HCSC CEO McCaskey Is Highest-Paid Exec Among

Volume 7, Number 11
Contents
3
In Their Own Words:
HCSC CEO Hemingway
Hall Looks for Growth
3
Table: CDH Members
Increasingly Mirror
Non-CDH Population
5
WellPoint’s Investment
Losses Drag Down
Quarterly Results
5
6
Financial News
7
Blues Plans Move
Toward Making PHRs
Interoperable
S.C. Blues Plan’s WC
Unit Buys Mississippi
WC Insurer AmFed
8
10
News in Brief
11
New Products and
Services
Table: Annual
Compensation for CEOs
Of Selected Blues Plans
November 2008
HCSC CEO McCaskey Is Highest-Paid Exec
Among Blues, Tops WellPoint CEO Braly
Raymond McCaskey, CEO of Health Care Service Corp. (HCSC), was the highestpaid CEO of the 31 Blue Cross and Blue Shield plan operators for which The AIS Report
was able to obtain 2007 compensation information.
At 12 million enrollees spanning four states, HCSC is only a third the size of the
35-million-member nationwide insurer WellPoint, Inc. Still, McCaskey earned more
than did the CEO of WellPoint, and topped salaries for the leaders of not-for-profit
Blues plans such as Highmark, Inc., Premera Blue Cross and Blue Cross Blue Shield of
Florida.
The AIS Report collected 2007 compensation data for CEOs of Blues plans in 45
states (see table, p. 10). WellPoint and Triple-S Management Corp., parent of Blue
Shield of Puerto Rico, are the only publicly traded Blues plan operators, and therefore
are the only ones required to file executive compensation data with the Securities and
Exchange Commission (SEC). Not-for-profit and mutual Blues plans typically do not
disclose executive compensation data to the public. However, the majority of plans
must submit executive compensation information to state insurance regulators. Most
states disclose the data upon request, although some, such as Kansas and Louisiana,
are not subject to public-records requests or do not collect the data.
McCaskey earned $10.3 million in total 2007 pay, outpacing the $9.1 million WellPoint CEO Angela Braly received last year in salary, bonus, stock and option awards
and incentive pay. Braly was appointed CEO of WellPoint on June 1, 2007. Although
McCaskey’s salary rose just 5% from $1.5 million in 2006 to $1.6 million in 2007,
continued on p. 11
Blues Plans Launch Individual Products as
Market Segment Shows Continued Growth
Managing Editor
Jill Brown
Contributing Editor
Chris Meehan
Executive Editor
James Gutman
Some Blue Cross and Blue Shield plans are launching new individual products
or making tweaks to existing offerings in order to attract new customers and comply
with new state rules aimed at making individual insurance more affordable. Several
insurers say they expect the souring economy to boost sales of individual products.
“Historically, when the economy is in a place where jobs are being lost, the smallgroup business goes down a little and individual business goes up a bit,” says Mary
Floyd, WellPoint, Inc.’s vice president of individual and senior sales.
Blue Cross Blue Shield of Arizona in September launched a suite of five individual
products that have premiums as much as 40% lower than the insurer’s other individual plans. Despite the lower premium rates, “these are not catastrophic products,” says
Chris Messner, the Arizona Blues plan’s director of product development and administration. “We have up to a $5 million lifetime value on the products.”
The 1.1-million-member Arizona Blues plan noticed that “we were offering very
rich benefits” compared with those of competitors, he says. “There were not as many
players [with products] down in the lower rates.”
continued Published by Atlantic Information Services, Inc., Washington, DC • 800-521-4323 • www.AISHealth.com
The AIS Report on Blue Cross and Blue Shield Plans Of the five new products, four are PPO-based plans.
“We’re pretty much more a PPO market than an HMO
market,” Messner tells The AIS Report. “We have seen a
decline in HMO products over time.”
The Arizona Blues plan launched the products and
developed the marketing messages in September, before
the financial crisis hit, Messner notes. “So we’re looking
at how do we change it and how do we tweak it going
into the new year,” once the insurer has more data about
the local impact of the faltering U.S. economy.
For now, “with these economic changes still evolving, I still think there’s a pretty big demand for the richer
benefits, so I think BlueOptimum is going to do better
and outpace the other products,” Messner predicts.
BlueOptimum has the richest benefit package, with
copayments rather than coinsurance for many services
and the broadest level of coverage among the five new
offerings.
A male between the ages of 18 and 24 who resides in
Maricopa County, Ariz., would pay a monthly premium
The AIS Report on Blue Cross and Blue Shield Plans (ISSN:
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November 2008
of $105 for BlueOptimum with a $2,000 deductible, according to the Arizona Blues plan’s Web site (www.
azblue.com/healthplans/Under65/rates.asp).
Customers also “are really gravitating” to consumer-directed health plan models, he adds. Another one
of the new products, BluePortfolio, is a high-deductible
PPO product that is compatible with a health savings
account. That customer would pay $96 per month for
BluePortfolio with a deductible of $1,750.
WellPoint Expands SmartSense Product
WellPoint said Oct. 20 that it is expanding the popular SmartSense individual product to Colorado, with
plans slated to take effect Nov. 15.
Angela Braly, the insurer’s CEO, told investors that
the SmartSense product, which was piloted in Georgia
and California a year ago, is now generating more than
half of the company’s new sales in California.
Speaking Oct. 22 during a conference call to discuss
third-quarter 2008 financial results, she said the insurer
will expand SmartSense to more states over the next few
quarters.
The PPO-based product features a choice of deductible levels ranging from $500 to $5,000. Benefits include
three physician office visits at a $30 copayment before
the deductible takes effect, with further physician visits at 30% coinsurance after the deductible is satisfied.
Members also receive coverage for pharmacy, inpatient,
outpatient and emergency room services, with a $7 million lifetime cap.
“This is more of a mainstream product aimed at
people who aren’t looking for bare-bones [coverage],
don’t need maternity coverage and would like some
first-dollar benefits,” Floyd says. SmartSense is different
from its low-premium, high-deductible TONIK product,
which was introduced three years ago and marketed to
young adults no longer covered by a parent’s policy
(The AIS Report 9/07, p. 4), according to WellPoint.
Colorado premiums for SmartSense, which is aimed
at students, early retirees and the uninsured, range from
$33 to $178 a month for a healthy adult male.
While Floyd declines to offer specific enrollment expectations, she predicts SmartSense will become a “top
seller” in Colorado.
Meanwhile, Horizon Blue Cross Blue Shield of New
Jersey is making changes to its individual products to
comply with a new law aimed at making individual insurance products more affordable. “We’re hard at work
at that, because we think there are some huge opportunities,” says Robert Meehan, the insurer’s vice president
of consumer and senior markets. “Obviously people
are getting laid off, unfortunately. This will play into it
pretty well for them.”
EDITORIAL ADVISORY BOARD: Matthew Borsch, CFA, Vice President, Goldman, Sachs & Co., Joe Gifford, M.D., Chief Medical Officer, Regence
Blue Shield, Professor James Robinson, University of California, School of Public Health, John Parker, Managing Director, External Affairs, Blue
Cross and Blue Shield Association
November 2008
The AIS Report on Blue Cross and Blue Shield Plans
Starting in January 2009, New Jersey health insurers
will be allowed to take into account the individual’s age
when setting premiums for individual health insurance
products, Meehan says. Up until now, health insurers had
to use community rating. The Progressive Familycare law
(S1557/A2624) allows insurers to use age rating with a
band of 3.5 to 1, he explains. If a carrier’s lowest rate for a
particular product is, say, $100 per month for a 20-year-old
male, the highest rate for that product can be no more than
$350 monthly.
The New Jersey legislature recognized that enrollment in individual products was falling, Meehan tells
The AIS Report. It also looked at the success of another
state-regulated individual insurance product that uses age
rating.
For that plan, “we were successful in getting lot
more people below the ‘pivot age’ to buy into the plan.”
The pivot age, an actuarial term, is the age “below which
you’re advantaged and above which you’re disadvantaged because of age rating,” he explains.
“Right now, the average age in community-rated
plans tends to be very high,“ he says. “So if you can bring
the average age down by enticing [younger] people” to
purchase the product, rates ultimately will come down for
everyone. But, Meehan concedes, “that will take time.”
Excellus Holds Insurance Screenings
In an effort to boost enrollment in state-sponsored
individual insurance plans, Excellus Blue Cross Blue
Shield is holding free health insurance screenings for
uninsured individuals across its service area.
Excellus staff members will help residents review
eligibility for programs including Healthy New York
and managed Medicaid. Excellus representatives also
are helping eligible individuals complete the necessary
paperwork.
“We saw a need in many of our service areas and
embarked on a marketing campaign around back-toschool time to reach this population, who were more
likely to sign up for health insurance when their kids
needed physicals and immunizations to get ready for
school,” explains spokesperson Joy Davia. The insurer
targeted 30 counties using television ads. “These marketing efforts were new, and prompted by our own research
that showed that there was a population of uninsured
children and adults in these counties who could benefit
from our safety-net products, including Family Health
Plus and Child Health Plus.”
Contact Arizona Blues spokesperson Regena Frieden at (602) 864-4046, Davia at (585) 238-4374, Horizon
spokesperson Cathleen Coleman at Cathleen_Coleman@
horizon-bcbsnj.com or Shalon Roth for Floyd at sroth@
ricochetpr.com. G
In Their Own Words: HCSC CEO
Hemingway Hall Looks for Growth
The following interview is part of an occasional series in
The AIS Report that examines hot-button health insurance
issues though the words of the industry’s thought leaders. To
suggest a topic and commentator, contact Jill Brown at �������
jbrown@
aishealth.com.
Pat Hemingway Hall, 55, was elected CEO of Health
Care Service Corp. (HCSC) effective Nov. 1. HCSC, which
operates the Blue Cross and Blue Shield plans in Illinois,
New Mexico, Oklahoma and Texas, said Hemingway
Hall succeeds Raymond F. McCaskey, who is retiring
from HCSC after 32 years of service. Hemingway Hall has
served as HCSC’s president and chief operating officer
since November 2007. She was HCSC’s executive vice
president of internal operations from 2006 to 2007, and
president of the Texas Blues plan from 2001 to 2006.
The AIS Report: You’re taking the helm when many
health insurers are scaling back their growth estimates
and preparing for lower net-income results. How has this
changed HCSC’s plans for growth?
Hemingway Hall: We’re still working through what
the impact will be on us from a growth perspective in 2009.
Our growth historically has been pretty spectacular, but
clearly the current economic conditions present challenges
on a number of fronts, and growth is one of those. So we
are revisiting our projections. Probably like every plan, we
will have a reduction in growth from existing employers
CDH Plan Members Increasingly
Mirror Non-CDH Population
The age of enrollees in consumer-directed health (CDH) plans
increasingly mirrors the broader population, according to the Blue
Cross and Blue Shield Association’s 2008 “CDHP Member Experience
Survey,” released Oct. 20. Collectively, Blues plans serve 4.4 million
CDH members, up 50% from last year. The survey, conducted in
August 2008, collected information from 2,791 people aged 18 to 64
with private health insurance coverage.
Age Distribution of HSA and Non-HSA Enrollees
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
7%
10%
32%
25%
35%
41%
26%
24%
2005
HSA-eligible
2007
HSA-eligible
14%
26%
21%
24%
42%
38%
18%
17%
2008
2008
HSA-eligible Non-CDH Plan
18-29 30-44 45-54 55-64
Sources: 2005, 2007 and 2008 Blue Cross and Blue Shield
Association CDHP Member Experience Surveys
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The AIS Report on Blue Cross and Blue Shield Plans who are downsizing and bankruptcies. We already had
one of those occur here in Chicago recently. So we believe
growth will moderate — but we’re not looking for negative
growth and we’re not looking for flat growth.
The AIS Report: How is HCSC preparing for possible
health care reform?
Hemingway Hall: We’ve done a lot of work over the
last 18 months trying to envision what the future looks
like, and of course we’ve had to go back and look at what
change will look like given the economic conditions. We
determined that the best we can do is to focus on our core
competencies, which will allow us to succeed regardless of
what the future presents.
The AIS Report: Can you give some examples?
Hemingway Hall: The first area that has definitely given us a huge advantage is our service capabilities. So we’re
looking at how we can continue to embellish and enhance
our service for our customers, our brokers and our providers. And health care management certainly has been a key
ingredient for our success today. We believe it will be essential for us as we go forward. The third area is health care
technology. And we have made huge investments there.
And the last area — and it’s related to technology — is having better information that allows us to understand what
we’re doing right and where we need to focus to do better.
And we think that, whatever the future looks like, if we
continue to excel in those areas, we’ll be prepared.
The AIS Report: Some of your competitors have endorsed individual or employer coverage mandates as an
element of a health care coverage-expansion program.
Where does HCSC stand?
Hemingway Hall: Mandates are interesting. The big
question is, do they work? Most states mandate that you
have car insurance. And I think that the percentage of
people in any given state who don’t have car insurance
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November 2008
is 15%, which interestingly correlates with the number of
uninsured [in health care] in the country today.
The AIS Report: HCSC recently has made some acquisitions to improve its technology and health management
capabilities, including the purchases of MEDecision Inc.
(The AIS Report 7/08, p. 7) and TMG Health (see brief, p. 8).
Is the company looking at other possible acquisitions?
Hemingway Hall: We’ve spent a lot of time looking
at what our core capabilities need to be, and that’s what
drove us to those two acquisitions. We don’t have anything that is in discussion now. We also have become a lot
more strategic about those capabilities. There are a lot of
opportunities among small companies. But our focus now
relates to the core capabilities that need to be part of our
fabric.
HCSC Eyes More Blues Alliances
The AIS Report: HCSC has pursued a geographic
strategy in building alliances with other Blues plans. Do
you expect to continue that strategy?
Hemingway Hall: Geography is always a nice feature,
if you can align with a state that’s in close proximity. But
more important for us is how we can collaborate with likeminded Blues plans that share our same perspective about
the value of being non-investor-owned. We are interested
in how we can best work together to provide some scale,
to provide some access to additional capabilities that
translate value to the members in our states and in other
states in conjunction with other Blues plans.
The AIS Report: After Horizon Blue Cross Blue Shield
of New Jersey said it would apply to convert to a forprofit, publicly traded company (The AIS Report 9/08, p. 1),
many observers predicted this would set off another wave
of conversions among other Blues plans. Do you share that
belief?
Hemingway Hall: I think conversion is a complicated
process that has become even more complicated given the
current market conditions. I haven’t seen anything that
would indicate that there would be a watershed of conversions. I’ll tell you, given the market conditions and given
our position, I wake up every day feeling pretty good
about not being investor-owned.
The AIS Report: What are your interests outside of the
office?
Hemingway Hall: I enjoy spending time with my
husband, Robert, and my pets — two cats and a Yorkie. I
also like to read a good book at the end of the day, listen to
music and visit with friends. One thing that most people
don’t know about me is that I also own a tugboat — just
for fun!
Contact Hemingway Hall through HCSC spokesperson Mark Lane at [email protected]. G
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November 2008
WellPoint’s Investment Losses
Drag Down Quarterly Results
WellPoint, Inc.’s third-quarter 2008 financial results
were marred by a problem likely to dog many not-forprofit and mutual Blue Cross and Blue Shield plans in
2008: lower investment income. The giant publicly traded
Blues plan wrote down nearly $600 billion in investment
losses. And although not-for-profit and mutual Blues
plans typically hold more of their investment portfolios in
lower-risk bonds, they also are expected to report lower
investment results, according to a recent analysis.
WellPoint reported quarterly net income of $820.7
million, or $1.58 per share, down from $868 million, or
$1.45 per share, for the year-ago period. The most recent
quarter’s results included net realized investment losses
of $562.6 million, compared with $42 million for the same
period in 2007.
The majority of the reduction was tied to investments
in the Federal Home Loan Mortgage Corp. (Freddie Mac)
and the Federal National Mortgage Association (Fannie
Mae), the huge mortgage finance firms that were bailed
out by the federal government Sept. 7 ($229.5 million) and
The AIS Report on Blue Cross and Blue Shield Plans
Lehman Brothers, which filed for bankruptcy protection
in September ($88.5 million). WellPoint’s investment portfolio exceeds $18 billion.
Wayne Kaminski, a financial analyst with A.M. Best,
says that although WellPoint’s investment portfolio took
a hit this quarter, there were no surprises in its quarterly
earnings. “WellPoint has a conservative portfolio with
most of their investments in bonds [and] with a small
percentage in equities,” he explains, adding that the company did have “a few rotten apples in the bunch.”
WellPoint CEO Angela Braly reassured investors during an Oct. 22 conference call to discuss financial results.
“Our insurance subsidiaries are very well capitalized
and, on a combined basis at Sept. 30, 2008, have statutory
capital levels approximately $6.3 billion higher than what
the state regulators require and $3.3 billion above the Blue
Cross and Blue Shield Association’s minimum required
level,” she said. “We have no needs or plans to inject capital into our insurance subsidiaries.”
Braly also told investors that the company “delivered a solid third quarter amidst a challenging economic
environment.” The insurer had 35.3 million members on
Sept. 30, 2008, an increase of 532,000 members, or 1.5%,
FINANCIAL NEWS
u Blue Cross Blue Shield of Michigan said it laid
off 100 employees as part of an effort to reduce
administrative costs. The insurer eliminated 100
positions, says spokesperson Helen Stojic. The move
was part of an effort to “be as affordable as possible
in terms of our health care coverage,” she explains.
“We were looking at the soft economy that both we
and our competitors are facing, and also some of the
losses that we’re seeing in our individual lines.” The
insurer has projected a 2009 loss of $264 million in its
individual business, Stojic adds. The Michigan Blues
plan is pushing the state legislature to enact reforms
to the individual market that would create a high-risk
pool supported by all insurers (The AIS Report 3/08, p.
5). Under current law, the Michigan Blues plan is the
only insurer required to accept all enrollees without
medical underwriting. Call Stojic at (313) 225-8113.
u Blue Cross Blue Shield of North Dakota on Oct.
17 blamed the state’s decision to deny a proposed
premium rate increase for the move by ratings
company Standard & Poor’s (S&P) to downgrade
the insurer’s financial rating. The North Dakota
Blues plan said that S&P downgraded the insurer
from “A” to “A-,” explaining that the insurer’s “in-
ability to increase premiums at the same pace that
medical costs are rising will diminish its competitive
position, operating performance and capital adequacy.” North Dakota Insurance Commissioner Adam
Hamm (R), who was re-elected on Nov. 4, denied a
proposed 14.8% rate hike for individuals and a 14.9%
increase for employer groups (The AIS Report 9/08, p.
11). The 425,000-member North Dakota Blues plan
says it expects an underwriting loss of $20 million in
2008. It adds that the ratings downgrade “is the first of
many possible ramifications resulting from” Hamm’s
rate denials. Call North Dakota Blues spokesperson
Denise Kolpack at (701) 282-1485.
u Triple-S Management Corp. said investment
losses cut into its third-quarter 2008 net income.
The parent of Blue Shield of Puerto Rico posted thirdquarter 2008 net income of $9.5 million, or 29 cents per
share, compared with $15.5 million, or 58 cents per
share, in the 2007 period. The most recent quarter’s
results include an after-tax net loss of $5.4 million, or
17 cents per share, in net realized and unrealized investment losses. Call Triple-S CFO Juan-Jose Roman
at (787) 749-4949.
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The AIS Report on Blue Cross and Blue Shield Plans from 34.8 million on the same date last year. WellPoint’s
national-accounts business drove the increase, adding
643,000 members over the past 12 months. But the insurer
lost 119,000 members in state-sponsored programs, largely because of the withdrawal from the Ohio Medicaid
programs.
Not-for-profit and mutual Blues plans, which typically hold more investments in bonds, likely will see lower
investment gains because of the Federal Reserve Board’s
decision to lower interest rates several times this year (The
AIS Report 10/08, p. 1). These companies also hold some
equities, and thus are vulnerable to falling stock prices.
Oppenheimer & Co. equities analyst Carl McDonald
recently analyzed the balance sheets of 10 not-for-profit
Blue Cross and Blue Shield plans and subsidiaries, and
found that they held almost $12 billion in cash and investments at the end of 2007, with almost 17% in equities,
including some “modest exposure to troubled financials
that will have to be written down” under accounting
rules.
Assuming that Blues plans’ investments have had
similar returns as the Standard & Poor’s 500 index, McDonald estimates the companies have lost almost $1 billion, or about 8% of total investments, so far in 2008. He
cautions that these not-for-profit and mutual Blues plans
do not have the same access to capital as do publicly
traded insurers. This means that Blues plans “have to be
more judicious about their capital base. In the current
environment, we think it makes a lot of Blues wary about
underpricing [premium rates].” But McDonald adds that
“this impact probably won’t be felt until the 2010 renewal
season” since many insurers have already set 2009 premium rates.
The 10 Blues companies in his analysis include some
fairly large plans, such as Blue Cross Blue Shield of Florida, and some subsidiaries of Blues plans, such as Blue
Cross Blue Shield of Michigan’s Blue Care Network.
Mental Health Parity: What
Plans and Sponsors Must Do
to Comply
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November 2008
Contact McDonald at carl.mcdonald@opco.
com, WellPoint spokesperson James Kappel at (317) 4886400 or James Peavy for Kaminski at [email protected]. G
S.C. Blues Plan’s WC Unit Buys
Mississippi WC Insurer AmFed
Although only a handful of Blue Cross and Blue
Shield plans offer workers’ compensation (WC) insurance
and administration, some insurers still are making robust
investments in the product lines. Most recently, BlueCross
BlueShield of South Carolina’s WC subsidiary last month
purchased a Mississippi WC firm.
Columbia, S.C.-based Companion Property & Casualty Insurance Group purchased all the insurance operations of AmFed Holding Company Inc., the largest WC
insurance and administration company in Mississippi.
Terms of the deal were not disclosed.
Among other Blues plans with WC units:
u Highmark Inc.’s HM Insurance Group administers selffunded employers’ WC programs.
u WellPoint, Inc.’s WC unit provides network rental and
medical management services to WC carriers.
u Blue Cross Blue Shield of Michigan’s Accident Fund
Insurance Co. of America is licensed to sell WC insurance
in 49 states and the District of Columbia.
The South Carolina Blues plan created its WC subsidiary 25 years ago, Companion President Charles Potok
tells The AIS Report. Initially, he says, “we tried to do the
synergistic thing between a health insurer and a workers’
compensation insurer, where Blue Cross provides coverage for off-the-job injuries and we provide coverage for
on-the-job injuries.”
But as many WC firms have found, cross-selling WC
and health insurance is fairly difficult, Potok says. “We’ve
tried over the years, as the market cycles change, to put a
combination product out there. But there are all kinds of
issues with expiration dates and underwriting requirements,” he says.
And marketing combination products “is so hard,”
Potok adds. “Different people purchase it in the corporate
level,” with human resources executives leading health
insurance purchasing, and risk managers directing property and casualty insurance buys.
Companion sells a variety of property and casualty
insurance products, including commercial auto insurance, property and liability policies and residential condominium insurance. The firm also provides third-party
administration services for WC, liability and property
insurance products. Companion Property & Casualty
does business in 47 states.
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November 2008
The AIS Report on Blue Cross and Blue Shield Plans
The AmFed acquisition was attractive, Potok says,
because of the strategic fit between the two companies.
“AmFed is very similar in what they do compared to
what we at Companion do. What they lacked was the
financial ability to continue to grow and to get an A rating
from A.M. Best,” he explains. “Through this acquisition,
we will be able to help them to get that rating.”
AmFed writes about $100 million annually in WC
premiums and premium equivalents, Potok says, compared with Companion’s $400 million.
Contact Potok through Billy Quarles at billy.quarles@
bcbssc.com. G
Blues Plans Move Toward Making
PHRs Interoperable Despite Cost
As insurers, information technology (IT) companies
and other stakeholders scramble to develop and implement their own versions of personal health records
(PHRs), stakeholders are trying to make these records
interoperable. But some Blues executives warn that work
is moving slowly — and very expensively.
PHRs hold great promise for revolutionizing health
care, by connecting patients with their medical history,
prescription drug patterns and lab test results. The records can empower consumers while improving the
quality of care, reducing medical errors and increasing the
efficiency of health care services.
A portable PHR can move with the patient if he or she
changes insurance coverage or providers. But in order to
achieve portability, explains Adam Birnbaum, vice president of policy in charge of health information technology
at the Washington, D.C.-based Blue Cross and Blue Shield
Association, insurers and other stakeholders must overcome differences in formats, content, and other technical
issues that are obstacles to interoperability.
Despite best intentions, the goals of getting electronic
medical records in every medical office and PHRs owned
by every patient in America are “in serious trouble,” says
Jerry Bradshaw, executive director of Arkansas BlueCross
BlueShield’s health information network. “Where will the
billions come from” to create such a system?
Efforts to establish national standards take time and
cooperation, says Bradshaw, who also is a committee
member of Health Level Seven (HL7), an American National Standards Institute-accredited standards developing organization. “It’s interesting trying to get people
from around the country to agree on things,” he notes.
The Arkansas Blues plan introduced a PHR system to its
members and contracted providers in 2007.
“It’s just an expensive proposition,” says Joe Gifford,
M.D., senior medical director of The Regence Group. “It’s
just hard to build a good business case for the interoperability piece” of PHRs, “just because of the sheer expense.
The standards are not bullet proof yet, and everybody’s
systems are different.”
Another problem is that so few Americans today use
PHRs. “Building and investing in a lot of infrastructure
for the small percentage of folks who are using PHRs, and
an even smaller set who are going to want to port them
from plan to plan — it’s just a tough economic case,” he
says.
Still, work continues. The Blues association is working with HL7 and the America’s Health Insurance Plans
(AHIP) trade group to help resolve technical issues that
limit interoperability. The three organizations last December signed an agreement to collaborate on portability
standards for personal health records.
“We make sure we’re heavily engaged in these organizations to help promote and advance interoperability,”
Birnbaum says. “We’re creating the business operating
rules that health plans and other associated stakeholders
will use.”
Vendors to the Rescue?
Bradshaw adds that the solution may be provided
by the market, as consumers and health plans sign up
to use PHRs offered by vendors such as Google Health,
WebMD LLC and Microsoft Corp.’s HealthVault. These
private companies have developed PHR systems that
offer portability and plug-in capabilities for insurers and
providers. “You can plug into a PHR today,” avoiding
many of the issues of developing a system from scratch,
he says.
The state of the field today is “a glass half-full, halfempty situation,” says Charles Kennedy, M.D., vice president of health information technology at WellPoint, Inc.
“We’re making progress, but we have a ways to go.”
WellPoint is piloting the development of a “master
medical record” in Dayton, Ohio, that incorporates data
from 150 distinct clinical sources and administrative
claims information. The pilot project includes 10,000
patients and about 300 physicians in the Dayton area.
The system, developed to comply with standards
developed by the American Health Information Community (AHIC), will be expanded on a regional basis
beginning Jan. 1, 2009, to include 100,000 patients and
1,000 physicians. WellPoint is using clinical and financial
rules to create messages, alerts and reminders that are
consistent with evidence-based medicine. “We want to
measure not just whether the system works, but whether
it is providing value as well,” Kennedy says.
Contact Birnbaum through Jackie Fishman at
(202) 626-8644, Bradshaw at (501) 378-2010 or Kennedy
through Lisa Greiner at [email protected]. G
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The AIS Report on Blue Cross and Blue Shield Plans November 2008
NEWS IN BRIEF
u Capital BlueCross last month proposed that it
take over the Blue Cross trademarks of Highmark
Inc. and Independence Blue Cross as a condition
of the proposed merger between the two companies.
In comments filed with the Pennsylvania Insurance
Department, Capital said it does not oppose the combination per se. But Capital said the deal as proposed
would result in an “unfair competitive advantage”
for Highmark and Independence. To remedy that,
Capital recommended that the insurance department
transfer the Blue Cross trademark to Capital, allowing it to compete against the new company in western and southeastern Pennsylvania, thus preserving
competition. Under that proposal, the combined
Highmark/Independence entity would compete
using only the Blue Shield trademark. Call Capital
spokesperson Joe Butera at (717) 541-6139.
u Blue Cross Blue Shield of Montana on Oct. 29
was awarded the contract to administer Insure
Montana, which provides health insurance to 731
businesses covering almost 4,000 enrollees. Insure
Montana, funded by a tobacco tax, provides a health
insurance purchasing pool for small businesses. John
Morrison (D), Montana’s state auditor and commissioner of insurance and securities, said Insure Montana chose the Montana Blues plan over New West
Health Care, the other bidder, because the Montana
Blues plan was “willing to reduce their administrative costs substantially.” In addition, its proposal
called for Insure Montana to recover premiums paid
that exceed medical and administrative expenses.
Visit sao.mt.gov/InsureMontana/index.asp.
u Capital BlueCross said Nov. 4 that it agreed to
acquire Dominion Dental Services for an undisclosed price. Alexandria, Va.-based Dominion has
400,000 dental members in Delaware, Maryland,
Pennsylvania, Virginia and Washington, D.C. “This
acquisition is part of our long-term strategy to remain the region’s leading insurer by delivering innovative solutions and world-class service to our
members at affordable prices,” Capital CEO William
Lehr, Jr. said in a prepared statement. The insurer
will offer dental plans under the name BlueCross
Dental. Various regulatory approvals are required
before the deal is finalized. Call Capital spokesperson Joe Butera at (717) 541-6139.
u Health Care Service Corporation (HCSC) on Nov.
3 completed the acquisition of TMG Health, a firm
that processes claims for Medicare, Medicaid and
group retiree plans. HCSC, which operates Blues
plans in Illinois, New Mexico, Oklahoma and Texas,
did not disclose the purchase price. As an HCSC
subsidiary, TMG Health will retain its brand identity,
and founder Jack Tighe will remain as CEO. Call
HCSC spokesperson Ross Blackstone at (972) 7661735.
u Blue Cross Blue Shield of Massachusetts said
it will require physicians to use e-prescribing in
order to qualify for its physician incentive programs. The change, which applies to both primary
care physicians and specialists, takes effect Jan. 1,
2011, one year before CMS starts imposing a penalty
for not using e-prescribing. The insurer said it would
help pay for new technology licenses for many physicians. The Massachusetts Blues plan estimates that
its members saved $800,000 in 2006 from reduced
copayments associated with e-prescribing. Call Massachusetts Blues spokesperson Tara Murray at (617)
246-4851.
u A newly formed Blues-backed venture capital
fund has made its first investment — of $5 million
in Initiate Systems, Inc. BlueCross BlueShield Venture Partners, L.P. is funded by 11 Blues plans and is
sponsored by the Blue Cross and Blue Shield Association. The participating Blues plans are Health Care
Service Corp., CareFirst, Inc., HealthNow New York,
Inc., Capital BlueCross, Independence Blue Cross,
Blue Cross of Northeastern Pennsylvania, Blue Cross
of Idaho and the Blues plans of Delaware, Hawaii,
Massachusetts and Michigan. Sandbox Industries,
a Chicago-based venture capital firm, serves as the
partners’ exclusive fund manager. The fund’s goal is
to invest in “technologies, products, and services in
the U.S. health care industry that promote efficiency,
lower costs, and improve options for consumers.”
Initiate Systems enables companies to leverage and
share data, supporting initiatives such as electronic
health records and clinical portals. Paul Brown, the
fund’s managing director, said in a prepared statement that “Initiate has proven through over 100
health care implementations that its software enables
hospitals and independent delivery networks to
deliver safe, responsive patient care while increasing
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November 2008
The AIS Report on Blue Cross and Blue Shield Plans
NEWS IN BRIEF (continued)
productivity and cost effectiveness.” Contact Brown
at [email protected].
u Hawaii Medical Service Association (HMSA),
which operates the state’s Blue Cross and Blue
Shield plan, says it will continue to provide its Keiki (child) Care Plan at no cost to parents through
the end of the year. HMSA and the state had been
sharing the cost of the plan’s monthly dues since
April 2008. On Oct. 15, the state notified HMSA it
was withdrawing its funding for the plan, effective
Nov. 1. About 2,000 children are enrolled in the Keiki
Care Plan, which was created for children who had
been uninsured for at least six months and were ineligible for any other state or federal health program.
HMSA has been funding the plan with money from
its reserve. Gov. Linda Lingle (R), who signed the
program into law in 2007, said a state budget shortfall
prompted the cut. About 85% of the children covered
through Keiki Care previously had been covered under a private, nonprofit plan that costs $55 a month,
according to Grace-Marie Turner, president of the Galen Institute. The free Keiki Care Plan, she speculates,
would have prompted more parents to drop coverage for their children. For more information, contact
HMSA’s Cliff Cisco at [email protected].
u WellPoint, Inc., the WellPoint Foundation and
the X PRIZE Foundation say they will collaborate
on a new health care system competition with a
potential award of $10 million or more. WellPoint
CEO Angela Braly said in a prepared statement that
“we’ve chosen to partner with the X PRIZE Foundation and will solicit the best ideas from all parties…
and all willing partners that may identify the next
great solution in health care.” Under the competition,
employers, providers, consumers, government partners and any other interested parties are invited to
help develop competition guidelines that reflect the
health care industry’s most pressing challenges. The
firm expects to finalize guidelines and the reward in
early 2009. WellPoint has agreed to transparently test
finalists’ entries in its state markets, to assess their
ability to result in achievable changes. “An X PRIZE
competition awards a minimum of $10 million to
the first team to achieve a specific goal set by the X
PRIZE Foundation,” WellPoint said. Call WellPoint
spokesperson Jim Kappel at (317) 488-6400.
u PEOPLE ON THE MOVE: Blue Cross and Blue
Shield of Vermont CEO William R. Milnes, Jr. said
he will retire on Nov. 30. Don George, the insurer’s
vice president of managed health systems and senior vice president and chief operating officer of the
company’s HMO affiliate, The Vermont Health Plan,
will act as interim CEO.…Capital BlueCross said it
elected board Chairman William Lehr, Jr. president
and CEO. Lehr has been the interim CEO since former CEO Anita Smith resigned Sept. 15 (The AIS
Report 10/08, p. 5). Capital also named board member
Ronald Drnevich senior executive vice president.
Former CEO James Mead, another board member,
was named special advisor to the president and
CEO.…Blue Cross Blue Shield of Massachusetts
named Bill Fandrich chief information officer (CIO)
and senior vice president. He previously spent five
years at CIGNA Corp., where he was the company’s
first chief informatics officer.…BlueCross BlueShield
of Tennessee named Robert Slattery vice president
and general manager of its Medicare Advantage and
supplemental products division. He previously was
executive director of United Healthcare’s SecureHorizons of New England business unit.…Jim Hart was
promoted to president and chief operating officer of
InStil Health Insurance Co., the Medicare subsidiary
of BlueCross BlueShield of South Carolina. Hart previously was a senior vice president of the South Carolina Blues plan.…Blue Cross Blue Shield of Arizona
promoted Vice President of Finance Karen Abraham
to senior vice president of finance and administration and senior BlueCard executive. The insurer
also promoted Director of Finance Bill Arthur to vice
president of finance. Deanna Salazar, vice president
of human resources and employee development, was
promoted to senior vice president and general counsel. And Director of Human Resources Greg Wells
was promoted to vice president of human resources
and employee development. The Arizona Blues plan
also promoted two sales executives. Julie Carr, senior
manager of small-group and individual sales, now is
director of small-group sales. And Neil Wilson, senior manager of national-account sales, now is director of large-group sales.…Blue Cross and Blue Shield
of Alabama appointed B. Scott McGlaun CIO. He
most recently was CIO at Synovus Financial Corp.
u Correction: The CEO of Blue Cross & Blue
Shield of Rhode Island is Jim Purcell. He was incorrectly identified as Jim Carol in the electronic version
of The AIS Report’s October 2008 issue.
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10 The AIS Report on Blue Cross and Blue Shield Plans November 2008
Annual Compensation for CEOs of Selected Blues Plans
(Ranked by highest total compensation in 2007)
Company
CEO
2007 Salary
2007 Bonus
2007 Total
2007 Other
Annual
Compensation Compensation
Publicly Traded, For-Profit Blues Plans
Larry C. Glasscock1
WellPoint, Inc.
Angela Braly2
Triple-S Management Corp.
Ramón M.
Ruiz-Comas3
$570,000
$467,628
$979,432
$2,017,060
922,269
588,311
179,677
1,690,257
541,500
431,000
91,924
1,064,424
$1,561,154
$8,682,541
$44,814
$10,288,509
Multistate Not-for-Profit or Mutual Blues Plans
Health Care Service Corp.
Raymond McCaskey
Highmark, Inc.
Kenneth Melani, M.D.
948,784
2,445,993
320,082
3,714,859
Wellmark, Inc.
John Forsyth
800,000
1,234,782
68,099
2,102,881
Premera Blue Cross
H.R. Brereton Barlow
686,895
1,247,942
136,647
2,071,484
CareFirst, Inc.4
David Wolf
782,803
766,471
0
1,549,274
47,154
0
0
47,154
315,690
451,160
20,190
787,040
$936,974
$2,500,000
$3,778,110
$7,215,084
Chester Burrell
The Regence Group
Mark Burns Ganz
Single-State Not-for-Profit or Mutual Blues Plans or Subsidiaries
Blue Cross and Blue Shield of Florida, Inc.
Robert Lufrano, M.D.
Horizon Blue Cross Blue Shield of New Jersey
William Marino
898,538
4,084,716
0
4,983,254
Blue Cross Blue Shield of Massachusetts
Cleve Killingsworth
935,481
1,877,642
789,570
3,602,693
Blue Cross and Blue Shield of North Carolina
Robert Greczyn, Jr.
880,000
2,322,014
27,649
3,229,663
Independence Blue Cross
Joseph Frick
941,715
1,645,701
8,308
2,595,724
Blue Cross and Blue Shield of Alabama
Gary Pope
679,108
1,656,220
253,200
2,588,528
Excellus Health Plan, Inc. (Lifetime Healthcare Cos.) David Klein
881,937
1,447,716
21,309
2,563,731
HealthNow New York Inc.
Alphonso O'Neil-White
732,000
1,216,820
288,208
2,237,028
BlueCross BlueShield of South Carolina
Malcolm Edward Sellers
393,111
1,555,325
171,080
2,119,516
Blue Cross Blue Shield of Michigan
Daniel Loepp
670,000
696,777
290,778
1,657,555
Blue Cross Blue Shield of Arizona
Richard Boals
777,108
0
867,004
1,644,112
Blue Cross Blue Shield of Kansas City
Tom Bowser
707,787
822,534
21,905
1,552,226
BlueCross BlueShield of Tennessee
Vicky Gregg
778,986
0
758,207
1,537,193
Capital BlueCross
Anita M. Smith
795,585
570,000
19,645
1,385,230
Blue Cross and Blue Shield of Rhode Island
James Purcell
558,420
399,312
7,914
965,646
Blue Cross and Blue Shield of Nebraska
Steven Martin
600,000
185,683
4,951
790,634
Blue Cross of Northeastern Pennsylvania
Denise Cesare
515,364
192,993
20,263
728,620
Arkansas Blue Cross Blue Shield
Robert Shoptaw
487,696
65,218
62,701
615,615
Noridian Mutual Insurance Co.
(Blue Cross Blue Shield of North Dakota)
Michael Unhjem
354,771
207,435
2,030
564,236
Blue Cross and Blue Shield of Vermont
William Milnes, Jr.
264,560
204,666
3,686
472,912
Blue Cross Blue Shield of Wyoming
Timothy Crilly
315,817
137,287
17,973
471,077
Blue Cross Blue Shield of Delaware
Timothy J. Constantine
291,663
174,751
0
466,414
Blue Cross and Blue Shield of Montana
Sherry Cladouhos
363,219
91,351
9,884
464,454
1
Larry C. Glasscock retired as CEO on May 31, 2007. The total annual compensation figures do not include stock awards worth $1,377,840 and
stock-option awards worth $4,155,120.
2 Angela Braly was appointed CEO on June 1, 2007. The total annual compensation figures do not include stock awards worth $2,160,159 and
stock-option awards worth $5,240,149.
3 Ramón M. Ruiz-Comas’ total annual compensation does not include stock awards worth $51,370 and stock-option awards worth $51,301.
4 David Wolf served as interim CEO and president from late 2006 until Chester Burrell assumed the office on Dec. 1, 2007.
SOURCES: Individual Blue Cross and Blue Shield plans, state insurance department documents, U.S. Securities and Exchange Commission filings,
complied by Atlantic Information Services, Inc.
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information on AIS’s detailed Health Plan Facts, Trends and Data.
November 2008
The AIS Report on Blue Cross and Blue Shield Plans
HCSC CEO Tops Blues’ 2007 Pay
continued from p. 1
his bonus doubled from $4.3 million to $8.7 million.
HCSC is the largest not-for-profit Blues licensee, operating Blues plans in Illinois, New Mexico, Oklahoma and
Texas.
Many not-for-profit and mutual Blues plans use the
same type of compensation plans as do publicly traded
insurers, says David Nygard, a senior compensation
consultant at Sibson Consulting, a human resources
advisory firm that is a subsidiary of The Segal Co. Notfor-profit and mutual Blues plans “don’t have equity
per se, but they do have some kind of synthetic longterm plan. It has the same look or feel as a stock award,
but it’s just not stock, it’s cash.”
He cites one East Coast Blues plan that assesses
executive performance and sets compensation on the
basis of customer growth and “value creation.” To measure customer growth, the company (which he declines
to name) tracks the number of contracts at the beginning and end of the period. And to measure value creation, the insurer tracks items such as change in surplus
and cost of capital over the previous three-year period.
“It’s a loose return-on-asset type of measure,” Nygard
explains.
“I know of a couple [other Blues plans] that have
something very similar to this,” he says. He speculates
that many Blues plans likely use a similar system.
11
Among other Blues plan executives’ compensation
packages:
u Robert Lufrano, M.D., CEO of Blue Cross and Blue
Shield of Florida, was the second-highest-paid Blues
plan chief executive in terms of 2007 annual compensation, with $7.2 million. His total compensation rose
27% from 2006 to 2007, driven by a 20% higher bonus
(from $2.5 million to $3 million) and other compensation that more than doubled (from $1.8 million to $3.8
million).
u William Marino, CEO of Horizon Blue Cross Blue
Shield of New Jersey, was the third-highest-paid Blues
chief executive. His total compensation rose 10% from
$4.5 million in 2006 to $5 million in 2007.
u Vicky Gregg, CEO of BlueCross BlueShield of Tennessee, saw her total compensation remain roughly flat
at $1.5 million from 2006 to 2007. Although her salary
rose 16% from $674,078 in 2006 to $778,986 in 2007,
her bonus fell 11% from $856,050 in 2006 to $758,207 in
2007.
u William Milnes, Jr., CEO of Blue Cross and Blue
Shield of Vermont, saw his total pay fall from $490,896
in 2006 to $472,912 in 2007. Although his salary rose
6% from $249,295 to $264,560, his bonus fell 14% from
$238,166 to $204,666.
Call Segal spokesperson Mary Feldman at
[email protected]. G
NEW PRODUCTS AND SERVICES
u BlueCross BlueShield of South Carolina on Nov.
11 introduced two small-group plans for businesses with between two and 50 employees. Business Blue Basic provides basic insurance coverage
for a low premium, the insurer says. And Business
Blue HDHRA is a high-deductible health plan that
is compatible with a health reimbursement arrangement. The two products are part of the South Carolina Blues plan’s Blue Spectrum product suite. They
are marketed alongside Business Blue Complete, a
comprehensive health plan; Business Blue HDHP,
a high-deductible health plan; and Business Blue
Secure, a product that incorporates more cost sharing in exchange for a lower premium. Call South
Carolina Blues spokesperson Elizabeth Hammond at
(803) 264-4626.
u Independence Blue Cross on Oct. 14 said it
added MinuteClinic to its PPO provider network.
MinuteClinic operates retail health clinics nationwide, including 17 locations in southeastern Pennsylvania and more slated to open over the next year.
MinuteClinic clinics are located inside CVS/pharmacy stores. Independence Blue Cross PPO members
will be responsible for their usual out-of-pocket cost
for a primary care physician visit. The insurer predicted that emergency room utilization will decrease
as more members use retail health clinics for nonurgent after-hours appointments. Visit www.ibx.com
for more information.
u BlueCross BlueShield of Tennessee said Nov.
10 that it expanded its Medicare Advantage (MA)
PPO Network. The insurer added 17 counties, and
now offers MA products in 22 counties across the
state. The Tennessee Blues plan’s BlueAdvantage
product initially was available only in Knox, Anderson, Loudon and Sevier counties in the eastern part
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12 The AIS Report on Blue Cross and Blue Shield Plans November 2008
NEW PRODUCTS AND SERVICES (continued)
of the state. The expansion primarily focuses on eastern counties, although a few western counties such
as Dyer and Shelby also are included. The insurer’s
BlueAdvantage portfolio includes MA private feefor-service products with and without drug coverage and Medicare supplement plans. Call Tennessee
Blues spokesperson Scott Wilson at (423) 535-7409.
u Blue Cross Blue Shield of Florida and UnitedHealthcare, Inc. were chosen to market health plans across
the state under the Cover Florida program. Gov. Charlie Crist’s (R) new health insurance program allows insurers to omit some state-mandated benefits in an effort
to expand coverage to some of the 3 million uninsured
adults in the state (The AIS Report 9/08, p. 11). Four other
health plans were chosen to offer products on a regional
basis. Each health plan will sell at least two plans, including one with catastrophic and hospital coverage,
and one without that. Call Florida Blues spokesperson
Valerie Rubin at (904) 905-5315.
u Anthem Blue Cross and Blue Shield of Maine expanded its Chamber BlueOptions Insurance product
line sponsored by the Maine Chamber of Commerce.
The Maine State Chamber Purchasing Alliance, Inc. and
local chambers said Chamber BlueOptions will include
eight health plans with HMO and PPO options, varying deductible levels and some consumer-driven health
plan options. Chamber BlueOptions health plans are
available to small businesses with between two and 50
employees and self-employed people who are members
of a chamber of commerce at the regional or local level.
The products give small-business employees an unusually large number of benefit options. For example, a
small company with eight employees could allow each
worker to choose a different benefit design. V���������
isit www.
chamberblueoptions.com.
u Health Care Service Corp., Inc. (HCSC) is launching an early disease intervention program targeting
metabolic syndrome. HCSC, which operates Blues
plans in Illinois, New Mexico, Oklahoma and Texas,
explains that metabolic syndrome is considered to
be a precursor to obesity, which itself is a precursor to
diabetes, hypertension, heart disease and certain kinds
of cancers. The wellness program will combine three
levels of intervention: a low-touch component that uses
HCSC’s online Personal Health Management tool; a
medium-touch component under which individuals
can work with personal coaches by telephone to personalize health goals and track progress; and a high-touch
component that includes a 10-week program focusing
on lifestyle lessons and techniques, including in-person
meetings and other educational and support activities.
Contact HCSC spokesperson Ross Blackstone at Ross_
�����
[email protected]�.
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