Wellpoint, the for-profit owner of Blues plans in fourteen plus states, is doing well in California. United Healthcare is most definitely not. The whys and wherefores are both instructive and predictive.
The Blues brand name is powerful to say the least. And the powers that be at Wellpoint are among the few, if not the only, health plan executives that actually understand the power of a strong brand. Here’s how Wellpoint’s CFO puts it:
“We think a big part of our real, real differentiator from our peers and our competitors is the brand name. This slide shows you how powerful the brand name is(my bold). And this is looking at our core 14 states; we did interviews with them. What you’ll notice is that the brand name is not deteriorating, it is actually growing.
Probably what’s more powerful is when you consider the fact that across the whole US, when you consider all of the Blue brands that are out there, the blue states out there that one in three Americans carries a Blue Cross Blue Shield card. We have the best brand in the business. It’s a very powerful brand.
So what has that resulted in? The brand has resulted in very very solid and strong market share. What you’ll see is in our 14 states we have the number one market share position in 13 of our 14 states (my bold) and we continue to grow in those states. The brand is very powerful.”
And that’s a CFO talking – not a sales type or marketing director, but a CFO – a financially-oriented exec who happens to be one of the top three managers at the biggest health plan provider in the nation.
That’s one big reason for Wellpoint’s success – people are more disposed to buy insurance from a ‘blue’ than from a UHC, and their senior management understands this
All has not been rosy for Wellpoint in California – they are embroiled and likely hugely embarrassed by their well-publicized decision to cancel policies for individuals who dared to actually file claims. Yet despite these stumbles, they are still growing, perhaps due in part to the problems UHC has encountered as it assimilates Pacificare.
UHC expects to lose over 300,000 Pacificare members this year. The losses are a result of UHC’s aggressive moves to integrate Pacificare into the UHC organization, moves that have angered physicians and members alike. UHC paid over $9 billion for Pacificare which included Medicare, PBM, health plan and individual products as well as ancillary offerings.
For that reason it isn’t possible to allocate that $9.2 billion across members, but it is safe to say that the 10% decrease in membership has made the cost-per-new-member equation a lot less attractive.
UHC grew via acquisition – from day one, the health plan has demonstrated a great ability to acquire and grow competing health plans. That’s part of what makes this somewhat surprising. Then again, the deal was one of the largest done in the health plan space, with lots of moving parts, and the complexity may have been more than UHC execs bargained for.
What does this all mean?
As health plans strive to meet ever-higher growth targets, their options are becoming increasingly limited. Acquisitions are getting more expensive and fewer. Organic growth is tough – fewer employers are offering health plans, and the individual market has gotten so expensive that only the well off can afford the premiums and deductibles and copays, as well as all the costs for their excluded conditions. Governmental programs are the big kahuna, but even there the resurgence of the Democrats bodes ill for Medicare Advantage and FFS. That leaves acquisitions as perhaps the best option for growth.
Unless you have a great brand name…
