After decades of failed attempts and a year of bitter partisan debate, health care reform became a reality when President Obama signed legislation on March 23, 2010. The new law is designed to overhaul the nation’s health care system and guarantee insurance for tens of millions of Americans. Despite the continuing debate over its implications and method of application, the legislation marks an historic turning point for the health industry, which faces a crisis caused by soaring costs and increasing consumer dissatisfaction.
“Before March 23rd, we were on an unsustainable path,” asserts Brad Wilson, president and CEO of Blue Cross and Blue Shield of North Carolina (BCBSNC). “We were a train wreck waiting to happen. Now we are on the brink of an historic opportunity. If we seize the moment and act collaboratively, we can lead the country in showing how we can improve health care.”
Wilson is in a strategic position to provide leadership for health care reform. He heads North Carolina’s largest health insurance company. BCBSNC serves more than 3.7 million customers. Its network of health care providers includes 92 percent of the state’s medical doctors and 99 percent of its hospitals.
BCBSNC has operated for 77 years and its health plans have earned the highest level of accreditation from the National Committee for Quality Assurance. Further, they boast an elite rank nationally for meeting or exceeding NCQA’s rigorous requirements for consumer protection and quality control.
“We are a major player in health care reform,” states Wilson. “We’re fully engaged in trying to make it work.”
Staying on Course
Wilson brings to BCBSNC extensive business experience, public policy expertise and a strong record of community involvement. He is a native of Watauga County and was the first person in his family to attend college. He holds a B.A. from Appalachian State University, a Juris Doctor from the Wake Forest University School of Law, and a Master of Arts from Duke University. His career and public service focus have included the practice of law as well as work on government and legislative issues, higher education, regulatory affairs and business.
Wilson joined BCBSNC in 1996, serving in a variety of senior leadership roles, including executive vice president, chief operating officer, general counsel and corporate secretary, before becoming president in 2010. Wilson’s commitment to serving North Carolina and its people has earned him the Order of the Long Leaf Pine, the highest civilian honor a Tar Heel governor can bestow.
Despite taking the helm of the state’s largest health insurance company in the midst of a troubled economy and the uncertainty surrounding health reform, Wilson has kept BCBSNC on course. The company has continued to enjoy stability in its customer base and financial performance.
The Triangle-based health insurer is by far the largest in the state, taking in nearly 70 percent of all dollars spent on health insurance premiums in North Carolina in 2008. United Health Care, the nation’s largest health insurer, is a distant second with 12 percent and WellPath Select is third with a 3.7 percent. BCBSNC is the 28th largest health insurer in the nation, according to the National Association of Insurance Commissioners.
BCBSNC’s numbers for total premiums do not include the $2.2 billion State Employee Health Plan. BCBSNC administers the plan but does not collect premiums from the state, which is self-insured.
In 2009, BCBSNC had a profit margin of 2.1 percent, or just 2.1 cents for each dollar of revenue. That is below the company’s target range of 3.5 to 4.5 percent. The company’s consolidated net income in 2009 was $107.3 million with total revenue at $5.2 billion. Profitability was affected by higher medical costs and slower membership growth because of the growing level of unemployment.
In 2010, BCBSNC was on track to meet its target net income ratio of 3.5 percent. In addition, the company attempts to maintain a 3- to 6-month claims reserve. It currently holds a 4-month cushion.
“We have enjoyed relatively good growth,” says Wilson. “During this down economy, when many insurers have lost customers, Blue Cross is holding its own. At the same time, we’re doing everything we can to become more efficient by lowering administrative costs and increasing productivity.”
Streamlining for Better Health
Currently, 13 cents of every premium dollar goes to administrative costs, while 87 cents pays medical costs. BCBSNC plans to reduce operating costs by 20 percent by 2014. A recent decision to outsource some claims data entry work should result in an annual savings of approximately $2 million, eliminating about 90 BCBSNC jobs. In addition, an early retirement program initiated last fall shaved about 400 positions.
Since health care legislation’s passage, BCBSNC has instituted other changes to both improve the quality of its service and lower prices. It recently announced a new product with comparatively low premiums and streamlined benefits, called Blue Advantage Saver. There are three plan designs to choose from and they all cover preventive care at 100 percent with no cost sharing.
BCBSNC is also employing technology to both increase efficiency and reduce costs. Members who have an iPod or iPhone can take advantage of a new iPhone application that helps compare drug costs, locate urgent care centers and reach customer service representatives. Members can now pay their premiums with automatic bank draft transactions.
BCBSNC is also encouraging physicians and pharmacies to practice electronic prescribing. Since it began its ePrescribe program in 2006, more than 2,000 N.C. doctors and 87 percent of the state’s pharmacies have adopted electronic prescribing. The program allows physicians instant access to a patient’s medical and drug history so they can avoid drug interactions. They can also view the patient’s health plan so they can discuss costs of drug choices.
Wooing New Customers
BCBSNC’s major challenge is to expand service quality while lowering prices and expanding coverage.
One opportunity for growth is in the small business market. Companies in this sector play a crucial role in North Carolina’s economy, providing nearly 50 percent of all private sector employment and contributing half of the state’s private non-farm gross product.
U.S. Department of Commerce statistics show small businesses make up 98 percent of North Carolina’s total number of firms. They account for 49 percent of paid employees and 43 percent of total annual payroll. What’s more, small businesses are heavily impacted by the health care reform legislation.
Starting this year, businesses that employ fewer than 25 workers, pay average annual wages of less than $50,000, and shoulder most of their employees’ health coverage can claim a tax credit worth up to 35 percent of health expenses. That will increase to 50 percent in 2014. The Congressional Budget Office estimates the tax credit will save small businesses $40 billion by 2014.
“Small business owners are doing the math,” says Wilson. “They want us to help them figure this out. They know a healthy work force is a happy work force.”
Recognizing that affordability is a key deterrent for small business employers when they consider the prospect of offering health insurance to their employees, BCBSNC is running ads about the new tax credits and recently placed an interactive calculator on its website to show small business owners the benefits of the cuts. Employers can also receive updates related to health care reform and small businesses.
BCBSNC hopes to win new customers among business owners who previously didn’t provide health coverage as well as to help educate and inform business owners about new regulations. Since the small business campaign began last June, there have been 6,500 total visits to the website, resulting in 260 requests for quotes.
“Small businesses are heavily impacted by health care reform,” says Wilson. “I hope all North Carolina small business owners will take advantage of these resources to ensure they receive the maximum benefits from this law.”
Collaboration for Better Success
BCBSNC started the ePrescribe program in partnership with Community Care of North Carolina and North Carolina Medicare to boost prescription accuracy and increase patient safety. It is just one of many programs, including Bridges to Excellence and Blue Quality Physician Program, where BCBSNC has worked in collaboration with physicians, hospitals and other health care providers. Wilson believes that collaboration is essential to solving health industry problems.
“All of us get it,” says Wilson. “We have got to change. We can’t keep replicating the same level of behavior. We are committed to talking collaboration.”
BCBSNC already partners with a number of organizations working toward a healthier North Carolina. In December, it helped The National Association of Free Clinics bring a one-day free medical clinic to Charlotte. More than 100 BCBSNC employees volunteered at the event.
BCBSNC collaborated with the Food Bank of Central and Eastern North Carolina to expand the Kids Cafe program into 34 eastern North Carolina counties. Kids Cafe is an after-school program that offers tutoring, nutrition, mentoring and nutritious meals to children at risk of hunger.
In 2009, BCBSNC and its employees contributed $925,000 to state United Way drives, much of which was designated for the Community Care Fund. BCBSNC also donated $165,000 to the United Way’s Teaming for Technology Program, which provides home computers to low-income families with children and individuals with disabilities in North Carolina. The company was honored as the United Way of the Greater Triangle’s 2010 Community Technology Partner of Excellence.
BCBSNC instituted the BCBSNC Foundation in 2000. In its 10-year history, the Foundation has invested more than $67 million to improving the health and well-being of North Carolinians through more than 450 grants. The Foundation has committed in excess of $22 million to support free medical clinics, helping the NAFC network grow from 59 operations seven years ago to 79 today. It is the largest free clinic network in the country.
In addition to forging new collaborations, BCBSNC recently appointed business professional Ellison Clary as director of Charlotte community relations, a new position designed to raise the company’s profile through community involvement and to strengthen its presence in the largest market in the state.
Clary, who previously operated Ellison Clary Comprehensive Public Relations, said he was delighted to be associated with BCBSNC and is happy to know BCBSNC is paying more attention to the Charlotte community.
“Health care is a defining issue of our time,” says Clary. “BCBSNC is an innovator in finding ways to better serve the most people with the best options for living healthy and productive lives.”