Over the past several years, WellPoint has grabbed headlines as it swept through the managed-care industry, converting Blue Cross and Blue Shield plans to for-profit status and rolling them up into what is arguably now the nations most dominant publicly traded health insurer.
But all the while, another Blues-plan consolidator has been quietly reshaping the managed-care landscapefrom the not-for-profit side.
Thanks to a steady stream of acquisitions and some major bargaining clout, Health Care Service Corp. has grown from its rootsrunning the local Blues plan in Illinoisinto a multistate insurance powerhouse with more than 11 million enrollees and nearly $12 billion in revenue in 2005.
The Chicago-based company is now the nations fourth-largest health insurer and the single largest among not-for-profits, outranking even the far higher-profile Kaiser Permanente in membership. And if its president and chief executive officer, Raymond McCaskey, has his way, Health Care Service will continue to grow in the coming years by providing other Blues plans with what he calls a safe haven from WellPoints clutches.
McCaskey, who has headed the company since 1993, says he doesnt believe all of the 15 or so Blues plans that converted in the past decade did so because they wanted to be for-profit. They did it because they wanted to consolidate, and they felt that WellPoint or (its predecessor company Anthem) was offering them a lot in terms of technology or scale, so going for-profit was a way to get from one place to another, he says.
My desire is for Health Care Service Corp. to be pivotal in providing noninvestor-owned Blues plans with an alternative to conversion, so that we can preserve a balance within the Blues system and maintain a strong not-for-profit voice in the U.S. healthcare system, McCaskey says.
Health Care Services push to consolidate the industry comes at a time when even some of the most financially healthy local Blues plans are feeling the heat from better-capitalized, national rivals or are struggling to implement large-scale projects such as new information technology systems. It also comes amid a mounting public backlash that has doomed the for-profit-conversions of at least three Blues plans in recent years (July 19, 2004, p. 7).
But some providers and consumer groups remain skeptical of Health Care Services strategy, if not its motives, arguing that the companys efforts to build a national Blues behemoth will only further blur the already fuzzy line between not-for-profit and for-profit health insurers.
Weve found that market conduct has more to do with size than (regulatory) status, says James Rohack, a member of the American Medical Associations board of trustees. When youre the dominant payer in a market, you can dictate what premiums patients are going to pay, you can dictate what payments providers are going to receive and theres no choice. Big is big, regardless of whether youre a for-profit or a nonprofit.