The Washington Post
December 1, 2001
by Daniel LeDuc and Matthew Mosk
“Maryland legislators who oppose the sale of the largest health insurer in the Washington-Baltimore region to a for-profit California insurance company say they plan to thwart the deal and force the health insurer to better protect the poor.”
CareFirst BlueCross BlueShield “has swelled into a powerhouse with almost $800 million in cash reserves, and the high fees paid to its board of directors have drawn the ire of lawmakers. CareFirst wants to convert into a for-profit company so it can be bought by WellPoint Health Networks Inc. in a proposed deal worth about $1.3 billion.”
“But Maryland lawmakers are less interested in the company turning into a for-profit insurer than they are in returning CareFirst to its original mission of covering the poor, so it earns its nonprofit status.”
“The legislature’s unhappiness with the BlueCross company is not new. Lawmakers vastly increased their authority to regulate the firm in 1993 after learning that the insurer had lost more than $100 million in risky investments and had given extravagant perks to its executives.”
Michael Morrill, spokesman for Gov. Parris N. Glendening (D):
“They’ve abandoned their initial mission even as they’ve received tax breaks for that mission. They’ve walked away from rural health care, they’ve walked away from the urban and poor people.”
Del. Michael E. Busch (D-Anne Arundel), chairman of the House Economic Matters Committee:
“Our intent was to have them run by a citizen board when we set it up in 1993. But right now, their compensation is the same as board members of a for-profit company, and their behavior is the same as a for-profit company.”
Comment: Americans are turning away from the more intrusive HMO network models of managed care and enrolling in PPO models such as Blue Cross and Blue Shield. Why? Many reasons are given, including the larger selection of panel providers and the greater freedom to access the system. But the predominant reason is money. The premiums of the PPOs remain affordable for most average income individuals.
Does this mean that PPOs have been successful in making health care affordable? Absolutely not. It is a mirage. WellPoint, formed by the for-profit conversion of California’s Blue Cross, has created a very successful business model of health insurance. Unlike the old indemnity Blue Cross and Blue Shield programs, WellPoint has been able to cap costs by contracting with the providers of care (though this is only a one-time benefit). More recently, WellPoint has developed innovative insurance products that are passing rising costs on to the beneficiary-patients.
Capping costs for the providers has decreased the funds available to the health care delivery system since the costs can no longer be shifted to under-funded public programs (Medicare, Medicaid and S-CHIP), nor to the unsuccessful tighter managed care plans. Solvency of the delivery system is now threatened.
The shifting of costs on to patients is a disaster in the making. Those that will need to access the system, either because of chronic problems or because of catastrophic illnesses or injuries, will find that the out-of-pocket expenses will threaten access to care because of lack of affordability. Most economists anticipate that this process of shifting costs to patients will greatly accelerate in the very near future. Those that will not need much care will continue to be deceived into believing that they are getting a good deal in their health care. What they do not understand is that they do not have the security that was provided by the traditional indemnity model Blue Cross and Blue Shield plans.
Thus, the newer PPO products are fantastic for those that do not need care, but they’re very deficient for those that do. Remember that the deficiencies are not only in the form of less affordable care, but they are also in the impaired infrastructure of our delivery system due to chronic under-funding. Even the very affluent will experience the problems of deficient emergency services and inadequate public health systems.
The directors of the nation’s Blue Cross and Blue Shield programs are all envious of the business success of WellPoint and are following the lead of their California (now national) sister. Even the non-profit versions have adopted the business patterns of WellPoint, though they are lining up at the regulator offices to file for conversion to the more lucrative for-profit status.
Many believe that the Blue Cross and Blue Shield plans are the best available. Yet they no longer meet even the standard of mediocrity. And they are no longer effective in providing solutions for the problems of escalating health care costs and the increasing numbers of uninsured and especially the under-insured. They are an embedded part of the fragmented, wasteful industry of private health plan bureaucracies. Isn’t it time to throw them out with the rest and adopt an equitable, publicly administered program of universal health insurance?