Bob Graham, Executive Editor

One of the worst jobs to have in insurance right now would be head of a managed care company. Okay, maybe the $3.9 million proposed salary for Pittsburgh-based Highmark Inc.’s CEO, Kenneth Melani, if Highmark Inc.’s merger with Independence Blue Cross is approved in Pennsylvania, would make it a bit easier to handle. But still, the world of managed care is in great flux and nowhere is it more evident than in the region’s Blues affiliates.

The nation’s health insurers don’t know what to do as medical costs spiral upward and people live longer. Add to that the growing calls for universal health insurance, even though there’s no way to afford it.

Each of these issues would in and of itself be a concern. But collectively, they present a perfect storm. Examples in the region show how health insurers are battening the hatches.
In New Jersey, Horizon Blue Cross Blue Shield of New Jersey, the state’s largest health insurer, has asked state officials to allow it to convert to a for-profit entity, ending more than 75 years as a non-profit. Company officials say more access to capital markets will allow it to invest in and acquire new capabilities and technologies.

The same theme was present at hearings for the proposed merging of Pennsylvania’s two largest health insurer, also Blue Cross and Blue Shield affiliates. Pittsburgh-based Highmark Inc. and Philadelphia-based Independence Blue Cross, both non-profits, are awaiting the state’s determination on whether they can merge. If combined, the new company would be the fourth largest insurer in the nation. Their respective CEOs spoke of increased national competition as well as the benefits of joining forces on technology and innovation.

But similar efforts have failed. In 2001, Maryland-based CareFirst, a Blue Cross/Blue Shield company and that state’s largest health insurer, sought to become a for-profit entity and merge with WellPoint Health Networks, a Thousand Oaks, Calif.-based health insurer and one of the nation’s largest managed care companies. Maryland’s insurance commissioner, Steven Larsen, thwarted that attempt. One year earlier, CareFirst affiliated with Blue Cross Blue Shield of Delaware, adding more than 200,000 new members to boost its overall membership to 3 million. In September 2006, CareFirst followed Delaware Insurance Commissioner Matt Denn’s order ending the affiliation.

At a Greater Philadelphia Association of Health Underwriters event this week, a recurring theme among agents was that the next six to 18 months are going to be quite pivotal for the insurance industry locally, regionally and nationally. Agents, brokers and carriers should get some guidance on how to proceed.

For Highmark’s Melani and others leading their health insurance companies into these uncharted waters, it might be time for them to actually earn those big bucks.