Many eyes in the health care and insurance world will be focused on Kansas this week as Insurance Commissioner Kathleen Sebelius starts hearings on whether Blue Cross and Blue Shield of Kansas can be sold to a for-profit, investor-owned insurance company.
Experts from across the nation have filed hundreds of pages of testimony on the proposed sale of Blue Cross of Kansas to Anthem Blue Cross and Blue Shield.
And more than 1,100 people attended an earlier round of five public hearings across the state on the proposal. In addition, the Kansas Insurance Department has received more than 500 e-mails and letters, and about 100 telephone calls per week on the matter in recent weeks.
"This is a huge deal in Kansas," said Nicole Basso-Corcoran, director of public information for the Kansas Insurance Department. "Blue Cross has 700,000 Kansans that they cover and it will affect the whole market down the line."
Blue Cross of Kansas is the dominant health insurer in the state. It began 60 years ago as a charity, became a company owned by its policyholders in 1992, and now its board wants to "demutualize," which would make the company owned by stock holders.
Under the proposal, Anthem will purchase the Kansas Blue Cross stock for $190 million. Kansas Blue Cross policyholders will retain their coverage, but will be paid off to terminate their membership interest in the company.
Officials with Kansas Blue Cross and Anthem say consolidation is necessary to secure a future of affordable health insurance for Kansans.
And, they say, look at the payoff policyholders will divide $320 million from the sale of the company and a portion of its reserves. That will go a long way to stimulating a slumping economy, they say.
Opponents to the proposal say the "bigger is better" argument doesn't hold up, and warn against focusing on the immediate payoff, saying that the long-term effect will mean higher premiums and a lower quality of health-care coverage, an assertion that Anthem denies.
The public hearings on the issue will take place Monday through Wednesday from 9 a.m. to 5 p.m. at the Capitol Plaza Hotel in Topeka.
The sides
Indianapolis-based Anthem has purchased Blue Cross plans in eight states to become one of the largest health insurance companies in the nation, But according to health-care advocates, it has never run into the kind of opposition it has in Kansas.
"I'm gaining more respect for Kansas every day," said Dawn Touzin, an official with Community Catalyst, a Boston-based national advocacy group that has testified on behalf of consumers in several states where Anthem has taken over the Blue Cross plan.
Touzin said in most states where Anthem has proposed to purchase the local Blue Cross plan, the doctors, hospitals, nurses and other providers of health care stay in the background, or at most voice their concerns quietly, because they figure Anthem will take over and they will have to negotiate with the company.
"Anthem has done this a bunch of times. They have a well-oiled machine," Touzin said.
But in Kansas, the hospital, doctors and nurses' associations have come out in opposition to the sale. Touzin submitted testimony on behalf of the nurses' association.
According to the opponents, Anthem will force Kansas Blue Cross to make more money by reducing payments in claims and the quality of care.
For-profit, investor-owned Blue Cross plans spend 73.5 percent of revenues on health-care claims as compared with 83.7 percent for nonprofit Blue Cross plans, according to Carl Schramm, an insurance and health-care expert who filed testimony for opponents of the sale.
"Clearly, the driving force for a reduction in percentage payout is the pressure exerted by investors to achieve higher earnings," said Schramm, a former president of the Health Insurance Assn. of America, a leading trade group of health insurance companies.
But Mike Smith, executive vice president and chief financial officer of Anthem, disagreed with Schramm's analysis.
"In virtually every affiliation, we have expanded the number of providers and increased payments into the local health care economy," Smith said.
Never rejected
Anthem has never been rejected when it has sought to purchase a Blue plan, Touzin said.
But, Touzin, along with officials on both sides of the issue, said few if any Blue Plans are in as good financial shape as the one in Kansas.
As Schramm put it: "The Kansas Blue Plan enjoys one of the best reputations in the nation for efficiency and consumer service. It also enjoys enormous market share that has continued to grow."
That's one reason many of the opponents say there is no reason for Kansas Blue Cross to join Anthem if it isn't broke, don't fix it, they say.
But Kansas Blue Cross officials say the insurance business can be volatile, and a company would be able to better weather a storm if it were part of a larger corporation.
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