Four Blues plans in Oregon, Washington and Idaho have developed a regional alliance which they hope will be approved by state regulators in the next few months.
The structure of the alliance is in place, and a board and officers have been appointed. Blue Cross and Blue Shield of Oregon, King County Medical Blue Shield, Medical Service Bureau and Pierce County Medical Bureau Inc. have agreed on board structure and officers for the new venture.
So far the only snag they've hit is that the name they had hoped to use was already taken. They had wanted to create an umbrella company called the Benchmark Group but now have to look for another name.
'My favorite was Blue Horizon, but somebody's using it (too),' said Rod Bunnell, general counsel for Blue Cross and Blue Shield of Oregon in Portland. If the name is the only snag from now on, however, Blue's officials probably will be ecstatic.
'It really has taken the interest and cooperation of the four CEOs and four boards, ' said Dick Woolworth, president of the Oregon Blues and designated chairman and CEO of the new Blues holding company.
The new alliance will amass a true regional force in health insurance, representing combined assets of almost $1.5 billion, nearly 2.3 million members and 4,275 employees. The affiliation is intended to help the Blues reduce costs and better position themselves for regional business. Many health insurers nationally have been operating on the theory that bigger is better.
Mr. Bunnell said the Blues hoped to share technologies and methods among the plans to save money and capitalize on expertise. Examples may include sharing actuarial services and managed care strategies. Another place to save money is in joint bidding for new computerized claims systems, where a larger purchase can leverage a better deal.
Mr. Woolworth said he hoped the affiliation would grow enrollment to 2.5 million members within five years. He said his goal 'is to be able to be the leading managed care company in the area we serve.'
Locally, Blue Cross already enrolls about a third of all Oregonians. The Idaho plan, Medical Service Bureau, controls about 25 percent of market share in Idaho and the two eastern counties in Washington state. The two Washington plans, King County Medical Blue Shield, which covers Seattle and the surrounding area, and Pierce County Medical, which includes Tacoma, both have less than a 25 percent market share in the areas they serve. Those plans, said Mr. Woolworth, probably have the most room to grow.
Under the new structure, the umbrella company will have 22 directors, including nine from the Oregon Blues plan, seven from King County, three from Pierce County and three from Idaho. Although Mr. Woolworth will lead the alliance, the Blues' other top executives will also be officers.
The Idaho plan will be contractually affiliated with the holding company rather than a subsidiary because of nuances of Idaho state law. The insurers plan to spend $5 million to get the new venture going.
Despite impressive market shares represented by the regional Blues, the new alliance will still be a young cousin to other Blues that already have joined together.
The 1993 merger between two Blues plans in Indiana and Kentucky created a $3.4 billion revenue mass under an Indianapolis-based holding company called The Associated Group.
Currently that group is negotiating to add a Blues plan based in Cincinnati, Ohio, that would push its annual revenues up to $5.7 billion and make it one of the top 10 health insurers nationally, said Mike Murphy, spokesman for the Associated Group.
'There are several advantages' to regional growth, said Mr. Murphy. Besides lowering costs and giving policyholders more financial security, he said, 'this allows us to create more natural markets around metropolitan areas.'
The deal also gives The Associated Group, a for-profit venture, better access to financing, something Mr. Murphy said it needs to build its partnerships with physicians.
There's a smaller affiliation of Blues plans in Colorado, Nevada and New Mexico with $800 million in annual revenues and 600,000 members. But it, too, has achieved savings, said Carl Miller, spokesman for the group, which operates under the Denver holding company of Rocky Mountain Health Care Corp.
In that instance, said Mr. Miller, the group has created a single management team with one chief executive officer. 'It evolved over time,' said Mr. Miller, noting that affiliation began in 1987. 'We feel we've achieved considerable efficiency.'
Portland's Mr. Woolworth said the Northwest alliance has no current plans to become a for-product publicly traded company. Rather than purchasing physician groups or hospitals like some Blues plans have done, Mr. Woolworth said the group is
Neither does the new alliance plan to merge management efforts, say Blues officials. They plan to operate under a holding company with a board of directors comprised of the CEOs of each plan and representatives from each plans' existing board.
The plans expect to add about 15 employees to run the umbrella company, which will be based in Portland.
