A Presentation Made to Colorado Healthcare Strategy and Management

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Leading a Health Plan into an Uncertain Future
A Presentation Made to Colorado Healthcare
Strategy and Management by Caz
Matthews President, Anthem Blue Cross and Blue
Shield September 23, 2004
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Agenda

• Anthem Blue Cross and Blue Shield Background
• Strategic Planning
• Environmental Scan
• Define Implications
• Identify Sources of Distinction
• Review Proposed Strategic Direction and Results
• Question and Answer period

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Anthem BCBS Background

• Anthem Blue Cross and Blue Shield
• 1.1 million members (CO/NV)
• Annual Revenues of 1.0B
• 1 carrier in Colorado 2 in Nevada
• 1600 associates in 7 locations in the West
• Medical products including Behavioral Health and
  Drug
• Life, Dental, Vision Benefits
• Individual, Small Group, Medium Large Group
• All Counties in Colorado

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Step 1 Develop a Strategic Plan
A good strategic plan forces a company to commit
to what it wants to be, by maximizing
opportunities, confronting issues, clarifying the
choices it must make, and defining the value it
brings to its constituents.
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Step 2 Complete An Environmental Scan
1. Economy
Economy will be stable and grow at a modest pace,
but job growth will likely remain slow.
2. Demographics
U.S. population will grow by 10 to 310 million,
Becoming older and more diverse. Diverse groups
will comprise one-third of the population,
surpassing 100 million by 2010. Immigration
adding over one million people each year.
3. Public Policy
Public policy change at the federal level will be
incremental, rather than dramatic. More
significant change (e.g., legislation and
mandates) most likely at the state level.
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Step 2 Environmental Scan (cont)
4. Government Programs
Federal and state governments will be challenged
to fund Medicare and Medicaid programs. Greater
numbers of state governments will look for
private sector Medicaid solutions. The long-term
impact of the Medicare Modernization Act is
uncertain.
5. Health Costs
Health care costs will increase to over 17 of
GDP, or 2.8 trillion, by 2010. On average,
health care spending is expected to grow 7-7.5
per year through 2010. Increases will be driven
by factors like aging, chronic disease, unhealthy
behavior, regulatory and legislative changes,
medical and pharmaceutical advances, and
direct-to-consumer advertising.
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Step 2 Environmental Scan (cont)
6. State of Public Health
Poor health and lifestyle behaviors will continue
to drive the deterioration in public health and
increase the incidence of chronic disease. By
2010, over 50 of the population will have at
least one chronic illness.
7. Quality and Safety
Quality and safety will command increasing
attention with incremental not dramatic
progress. Improvements will initially come at
the local and regional level, rather than on a
broad national basis, given the fragmented nature
of the delivery system.
8. Health Care Consumers
Consumerism will gain greater prominence due to
the growth in the number of savvy, highly
demanding, and technology-oriented consumers. The
Internet will be a pervasive channel for
consumers.
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Step 2 Environmental Scan (cont)
9. Employers
For at least the near-term, employers will retain
a central role in purchasing health care
benefits, but will increasingly seek cost
containment and cost shifting options. Large
risk pools will continue to be necessary.
10. Consumer Directed Products
Consumer directed products will continue to
garner increased attention and acceptance and
gain up to a 25 share, with Health Savings
Accounts serving as a tipping point for this
evolution.
11. Consolidation
Consolidation will continue among payers.
Consolidation in the Blues will likely occur at a
somewhat slower pace..
12. Uninsured
Without intervention by the private sector, the
uninsured are expected to increase to 49 million
by 2010.
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Step 3 Implications of Environmental Scan
There are four key issues driving significant
change in the health care industry.
Uninsured
Affordability of Health Care
Health Industry Critical Issues
Quality and Safety
State of Public Health

• Potential Implications
• The uninsured numbers are unacceptably high.
  Industry-led solutions are needed to create a
  workable solution
• We need to manage the incidence of chronic
  disease, and promote disease prevention.

• Critical Issue
• Uninsured
• State of
• Public Health

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Step 3 Implications (cont)
There are four key issues driving significant
change in the health care industry.
Uninsured
Affordability of Health Care
Health Industry Critical Issues
Quality and Safety
State of Public Health

• Potential Implications
• Continued increases arent sustainable. The
  private sector must drive cross-industry
  cooperation and change.
• A major opportunity to improve health and reduce
  cost. Private sector must work with other
  industry players to improve quality and safety.

• Critical Issue Affordability of
• Health Care
• Quality and Safety

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Step 4 Identify Sources of Distinction

• Provider Networks Largest provider network in
  Colorado and Nevada
• Diversified and cost conscious products HMO,
  PPO, Point of Service (POS) with varying co-pays,
  deductibles and benefits
• Full service health benefits Dental, Vision,
  Life, Behavioral Health and Drug
• Health Care Quality Programs Anthem Care
  Counselor, Healthcare Advisor, MyHealth_at_ Anthem,
  Promoting Healthcare Quality, Special Offers
• Nationwide Coverage Away from Homecoverage
• Industry Knowledge and Expertise Sixty years of
  successful operation
• Industry Ratings A (Very Good) rating from
  Standard Poors A1 (Very Good) rating from
  Moodys and A (Excellent) rating from A.M. Best.

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Source of Distinction WellPoint Merger

• Will create the nations leading health benefits
  company
• Opportunity to introduce new products
• Opportunities to share/trade best practices
• Opportunity to spread investments and overhead
  across a larger membership base
• Increased job opportunities for associates
• Recognize at least 250 million annually in
  pre-tax synergies

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Source of Distinction New Products for Consumers

• Health Savings Accounts
• Resulting from Medicare Reform Act
• Tax savings opportunity
• Paired with qualified High Deductible Health Plans

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Source of Distinction New Products for Consumers

• Health Savings Account Trends
• By 2005, HSAs are expected to become a standard
  product of many health insurers and large
  financial-services firms. (Wall Street Journal,
  9/9/04)
• Eighty-one percent of all employers with 20,000
  or more employees are somewhat or very likely
  to offer HSAs by 2006 (Mercer Human Resources,
  4/04)
• One million accounts will have been opened by
  2004 and three million will have opened by 2006
  (Congresss Joint Committee on Taxation, 2004)

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Source of Distinction Leader in Quality and
Safety

• Pay for Performance (Promoting Health Care
  Quality)
• Support of Leapfrog/Patient Safety initiatives
• Information transfer and informed decision-making

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Source of Distinction Programs that Optimize
Cost of Care while Promoting Clinical Quality

• Integrated Disease Management
• Advanced Care Management
• Centers of Excellence

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Source of Distinction Health Improvement

• Wellness
• Lifestyle Modification
• Preventive Health

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Source of Distinction Supporting Community Health

• Heres to Your Health Community Involvement
  Program
• Contributed to over 60 nonprofit organizations in
  2003 and on track to do the same thing in 2004
• Contributed over 1.25 million to Mile High
  United Way in 5 years
• Miles for Smiles Mobile Dental Clinic for the
  Uninsured
• New partnership to serve Denver Boys and Girls
  Club and Mile High Montessori Child Care Centers
• Public Health Education Campaigns
• 100,000 donation to State of Colorado to
  purchase flu vaccine West Nile Virus campaign
  150,000 DEET packets

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Step 5 Review Proposed Strategic Direction and
Measure Results
Effective Strategic Planning requires a
continuous cycle of review and improvement.

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Conclusion and QA