2003-11-01 - Health Insurer Mergers Speed Move to "Consumer-Driven
Care"


"Consumer-Driven" Healthcare means we have the right to choose the
very best healthcare we can afford.

"The insurance industry is running out of the ability to charge 12 to
15 percent premium increases. ... We actually are going to see some
price competition."


""Consumers will learn they have to pay one way or another," said Tom
Morrison, a senior vice president with Segal, a benefits consulting
firm that advises companies on employee health plans."

"Blue Cross intends to market the policy to people ages 18 to 34 --
the most likely to be uninsured -- but the plan does not include
maternity coverage."


Sacramento Bee, Wednesday, October 29, 2003

Health plan a sign of future?

Blue Cross offers lower premiums
-  but higher costs down the line.


The day after insurance giants Anthem Inc. and WellPoint Health
Networks Inc. announced a merger deal that could create the biggest
health plan in America, WellPoint's largest subsidiary unveiled a new
product that many say indicates where this huge insurer may lead the
health care market. Continuing the race to create health plans that
lower premiums by charging patients higher fees for doctors and
hospitals, Blue Cross of California said Tuesday it will sell a new
individual health plan called RightPlan. It has monthly premiums as
low as $70 in Sacramento, but it requires patients to pay $40 for
doctor visits and 40 percent of hospital bills.

Known as consumer-driven health plans, policies such as RightPlan have
cropped up with greater frequency in recent years as insurers have
responded to demands from consumers and employers to curb steep
premium increases.

It may well be years before consumers know for sure how their premiums
or out-of-pocket health costs will change as a result of the
Anthem-Wellpoint marriage, which if approved by shareholders and
government regulators would forge a 26 million-member health plan with
Blue Cross/Blue Shield affiliates in 13 states.

But in California, where the newly merged company called WellPoint
Inc. would have about 6.7 million members, many health experts believe
this latest Blue Cross offering is a good indicator of what lies
ahead.

"Consumers will learn they have to pay one way or another," said Tom
Morrison, a senior vice president with Segal, a benefits consulting
firm that advises companies on employee health plans. "They have a
choice. They can pay on the front end to save money when they see a
doctor, or they can delay expenses by paying low premiums and
accepting that high co-payments and deductibles go with the
territory."

Though this is a surefire way to cut monthly premium costs for
employers who buy health coverage for workers -- as well as for
patients who purchase benefits on their own -- the choice does not sit
well with some consumer groups.

"In California, Blue Cross has been a leader in pushing more costs to
consumers," said Anthony Wright, executive director of Health Access,
a patient advocacy group based in Sacramento. "They do this and keep
diluting the value of insurance. The point of insurance is to not
worry about your bank account when you go to the doctor, and insurers
seem to increasingly be missing this point."

One aspect of RightPlan that Blue Cross officials said is essential to
achieving low premiums is cause for particular concern in the medical
community. Blue Cross intends to market the policy to people ages 18
to 34 -- the most likely to be uninsured -- but the plan does not
include maternity coverage.

"I don't see how you can responsibly sell something to a woman of
child-bearing age that does not cover maternity," said Robert David,
regional vice president for the Hospital Council of Northern and
Central California, a hospital trade group.

But like many others aware that health costs are spiraling out of
control, David stopped short of rejecting out of hand the concept of
consumer-driven plans -- especially if the low premiums succeed in
luring some of California's nearly 7 million uninsured residents to
buy coverage.

"Co-pays for drugs and doctor visits are going to continue to go up,
and so are patients' hospital bills," said Bill Sandberg, executive
director of the Sierra Sacramento Valley Medical Society. "With all
these mergers, there is going to be a race among other health plans to
join forces. That is eventually going to lead to fewer choices of
health plans in Sacramento. We can only hope that the remaining
choices will really let consumers decide for themselves whether they
want higher monthly premiums or higher fees for each trip to the
doctor."

At Blue Cross, officials would not speculate on whether RightPlan was
a sign of things to come. Spokeswoman Kellie Bernell said the
company's goal in expanding its selection of consumer-driven plans in
recent years has been to reduce the rolls of the uninsured by offering
affordable premiums.

Bernell said many managed care plans with similarly designed fees have
been popular with employers shopping for workers' insurance and with
patients seeking their own coverage.

The focus on fees for doctors and hospitals in these plans misses
other aspects that may appeal to consumers, Bernell said. RightPlan
includes discounts on gym memberships and weight-loss programs, as
well as access to acupuncture and other types of alternative medicine.

It may not be for everybody, Bernell said, but plans like this fill a
niche in the market.

"We want to be able to offer individuals affordable coverage that will
keep them from being uninsured," Bernell said. "People need to be
responsible for reviewing what's in the plan and what's not. We offer
about 10 other plans individuals can choose from if this one isn't
exactly right."



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New York Times, October 30, 2003

MARKET PLACE

Will Insurers Soon Cease to Be Masters of Pricing?

By MILT FREUDENHEIM

Some executives and analysts in the health care industry see a simple
message in the announcement this week that Leonard D. Schaeffer, one
of the most successful chief executives in health care, is selling
WellPoint Health Networks to Anthem Inc. - that the glory days are
fading for health insurers.

The merger, for $16.4 billion in stock and cash, jolted the
overlapping worlds of Blue Cross and commercial insurers as executives
and analysts tried to fathom what had motivated Mr. Schaeffer, a
hard-charging 58-year-old who has run WellPoint for 18 years. Between
them, Anthem and WellPoint operate Blue Cross plans in 13 states from
Maine to California.

By one account, Mr. Schaeffer is stepping down at a time when the
health insurance business is about to turn a corner after its most
prosperous year in a decade.

"The cycle has already turned," said Howard Phanstiel, a former
WellPoint executive vice president, who is now president and chief
executive of PacifiCare Health Systems. "Some insurance companies are
pricing below what we believe the medical cost trend is, as people
compete to improve their top-line revenues in the face of a sagging
economy."

Jeff Goldsmith, president of Health Futures, an industry consultant,
sees a direct link between Mr. Schaeffer's move and the changing
outlook. "The insurance industry is running out of the ability to
charge 12 to 15 percent premium increases," he said. "I think we're at
the top of the underwriting cycle. This is a real good top-of-the
market signal. We actually are going to see some price competition."

Larry Feinberg, president of Oracle Partners, a health care investment
fund, said: "There are going to be price wars in competitive markets.
The winners will be either big national guys with great computer
systems and cost controls, or the guys with strong proprietary
positions in regional markets. But the smaller ones may all get
gobbled up."

How the cooling of prices would affect insurance company profits is
disputed. "Margins will go down," said Jim Callanan, chief executive
of the Impart Group, a health care consulting firm in Boston.

That may be true at some companies but not at WellPoint, Mr. Schaeffer
insisted. WellPoint, he said, raises premiums just enough to stay
ahead of the annual increases it faces in its payments to doctors and
hospitals - something known in the business as the medical trend.

"This year, " Mr. Schaeffer said, "the increase in the medical trend
actually plateaued, and in the third quarter we've seen it go down 100
basis points," or 1 percent.

WellPoint premium increases will also probably slow, though they will
not go down, he said, as long as medical cost increases can be
limited.

So why is he handing the chief executive's baton of the combined
company to Larry C. Glasscock, the Anthem chief executive? Mr.
Schaeffer will be chairman of the new company, to be called WellPoint
Inc. even though Anthem people will outnumber WellPoint alumni, 3 to 2
, on the new board.

After 18 years as chief executive, he said: "It was time for me to
look at other opportunities. I'm interested in the whole health care
system."

WellPoint Inc., if approved by regulators and the Blue Cross and Blue
Shield Association, would have 26 million members, potentially the
largest comprehensive health care database outside the government.

He sees an opening to "gather enough information to manipulate and
analyze so we can give people guidance about the effectiveness of
health care procedures, the effectiveness of individual practitioners,
of this option and that option."

"As the baby boomers age," he said, "that's what they will demand,''
adding that they will not settle for "doctor knows best."

Mr. Schaeffer brushed aside suggestions that selling to Anthem was a
convenient solution to a lack of potential successors to him as chief
executive.

At least three former WellPoint senior officials are now senior
executives of other big managed-care companies. Besides Mr. Phanstiel
of PacifiCare, Ronald A. Williams is president of Aetna, and Marvin P.
Rich is executive vice president of Health Net.

"I'm 58, I could keep going," Mr. Schaeffer said, adding that
WellPoint's executive succession plans were "not a matter for public
discussion." His employment contract has three years to run, according
to a person outside the company close to the situation.

A union of WellPoint and Anthem would have far-reaching implications
in the industry. Both have had a strategy of buying Blue Cross and
Blue Shield companies, which typically have exclusive franchises and
dominant positions in a state. WellPoint and Anthem have at least 30
percent of the market in most of their 13 states and "in the 40's" in
Virginia, Mr. Schaeffer said.

But their takeover plans were blocked recently by state authorities in
Maryland and Kansas, in response to consumer groups' objections that
nonprofit health plans charged less for better benefits.

Analysts expect WellPoint and Anthem to be busy making their deal work
for two years or so before returning to the pursuit of acquisitions.

Mr. Schaeffer and Mr. Glasscock said the new company would compete
with national companies like Aetna, Cigna and the UnitedHealth Group
for contracts with the biggest employers. "The national insurance
companies are 50 states wide and an inch deep," Mr. Schaeffer said.
"This company will be No. 1 in 12 states."

Mr. Phanstiel regards the WellPoint-Anthem deal as a business
opportunity. "This is a good time for us to introduce some new
products that can compete with them," he said, "while this acquisition
cons