In a reversal of the West-to-East migration of managed-care companies, New York-based NYLCare Health Plans-the $2.5 billion subsidiary of New York Life Insurance Co.-has established a national accounts headquarters in California.
The operation, headed by Frank J. Racioppo, vice president of national accounts, will "focus on developing this segment of the market," he said. NYLCare's national accounts strategy is targeting high-technology multistate employers.
NYLCare will roll out an HMO in California in September, he said. The company now operates PPOs and gatekeeper exclusive provider organizations in the state.
The move is proof that the highly competitive California market still has the power to attract healthcare players.
"California is a pivotal state" for health plans that want to serve multistate employers, said Mark Weinberg, president of UniCare, the name that Woodland Hills, Calif.-based WellPoint Health Networks is using in its migration outside of California.
For-profit WellPoint-whose principal stockholder is Blue Cross of California-acquired the rights to the Blue Cross name and license in May.
"UniCare is a name we'll use everywhere we don't have a partnership with another (Blues plan)," he said.
To survive in an age of healthcare consolidation, companies need a strong presence in California, Weinberg said. The state's 32 million people account for 15% of the U.S. population.
So he isn't surprised that NYLCare is setting up shop in WellPoint territory.
That was predictable, he said, especially for a company targeting multistate employers. In the West, those employers are concentrated mainly in California.
Companies like WellPoint and NYLCare are expanding because multistate employers, who say they favor strong local plans, also want the administrative efficiencies of large, national managed-care companies.
Also somewhat predictable was the method NYLCare chose to set up its western stronghold. It illustrates the cross-pollination occurring in the healthcare business, and it begins with a move made by WellPoint.
In its eastward migration, WellPoint this year acquired the group life and health subsidiary of Massachusetts Mutual Life Insurance Co., based in Springfield, Mass. The acquisition essentially created a new business segment for WellPoint: serving the mid-sized multistate employer, those with as many as 3,000 employees, Weinberg said. They were Massachusetts Mutual's clients.
After the acquisition, Racioppo, a 30-year veteran of Massachusetts Mutual who managed national accounts, resigned. He was snapped up by NYLCare, along with 30 of the plan's former administrators, claims specialists and account supervisors who were laid off in the consolidation with WellPoint.
Almost instantly NYLCare had a national accounts team, based in Walnut Creek, Calif. NYLCare will "add significantly" to that team in the coming months, Racioppo said. Staff on the East Coast and in strategic locations across the country also are dedicated to national accounts, he said.
Racioppo said he spent his entire stint with Massachusetts Mutual in Silicon Valley and the San Francisco area. "I had a large following" among the employers there, he said.
NYLCare is courting fast-growing high-tech companies with 1,000 to 10,000 employees, such as those in Silicon Valley, and specialty retail clients. Many of those are former Massachusetts Mutual clients that are mainly in PPOs, and of course WellPoint wants to retain them.
Since contracts come up for renewal regularly, many of those employers "are really up for grabs," Racioppo says.
The competitors are somewhat similar in terms of 1995 revenues: $2.9 billion for WellPoint and $2.5 billion for NYLCare. But with the addition of Massachusetts Mutual's operations, WellPoint is projected to have 1996 revenues of $4.3 billion, according to Merrill Lynch & Co.
NYLCare has a presence in all 50 states-mostly PPO and indemnity-serving 3.5 million enrollees. WellPoint also is in all 50 states and serves more than 4 million enrollees.
They don't compete on all fronts-yet. WellPoint is in the individual, small-group, Medicare, Medicaid and local-employer markets. It also serves mid-size and large multistate employers with more than 5,000 employees. It's looking to buy other companies that also serve those jumbo employers, Weinberg said.
WellPoint is targeting the multistate employers that are "looking to migrate into more innovative managed-care products," Weinberg said. "We're going after the more innovative employers (that) are willing to work with us in a three-year strategic plan to get employees into more-managed plans."
"We put a lot of effort into the next generation of managed care. That is not going to be the HMO," but the most-managed plan that customers in each business segment are comfortable with, Weinberg said.
NYLCare is more narrowly focused. It's not going after the jumbo accounts at this time, or the individual or small-group markets, Racioppo said. "We're a boutique company, delivering high-level, personalized service in that very demanding segment of the market," the expanding high-tech companies. He touts NYLCare's consolidated information systems that streamline enrollment and claims processing.
Both Racioppo and Weinberg said the goal is a satisfied customer. They often use another word: survival.