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Blues plans' success could be hurting their bottom lines

Deloitte's Bill Copeland: To compete in today's healthcare insurance market, you can't play it safe

Single-state Blue Cross Blue Shield plans have quite the reputation--in 12 of the 15 states with exchange information available, WellPoint and Blues plans dominated the marketplaces last year. The plans' success stems from competitive market share, sound customer service and active participation with government programs.

But the Affordable Care Act has leveled the playing field for all insurers, and a business model that was once deemed innovative has lost some of its spark.

It's possible that their long run of success is, in fact, limiting the Blues' ability to progress in the industry, suggests a recent report from Deloitte.  

To compete in today's healthcare insurance market, playing it safe doesn't cut it, Bill Copeland, (pictured right) U.S. leader of Deloitte's life sciences and healthcare practice and the report's lead author, told FierceHealthPayer in an exclusive interview this morning. "Innovation is key, but innovation costs money. The Blues plans must be prepared to invest if they want to gain a competitive edge." 

Copeland and his colleagues analyzed health insurance company data via public financial statements and NAIC reports of Blues plans from 2012. They found that the five largest publicly owned Blues plans invested an average of $554 million on capital investments that year. Total capital spending by 18 single-state Blues plans was an average of $92 million.

"I wasn't surprised by the differences," Copeland says. "I was surprised by the size of the differences. Plans have been investing in new capabilities to compete on the exchange, and to bring value-based care to their network. I think this realization for the Blues plans was a wake-up call--they can't continue to invest like they're investing now."

The Big Five had, on average, over 14 times more capital available in 2012 than the single-state Blues plans, according to the report. Meaning, in order to survive, the Blues must think outside the box.

The authors suggest a potential shift to a for-profit enterprise, which could lead to greater capital investment. It's possible mergers and acquisitions among Blues plans could also boost investment.

For more:
- here's the report (.pdf)

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