June 2001: Dental Provisions #16

The Regence Group/Health Care Service Corporation affiliation

Last August, Regence BlueShield—together with our Regence Group partners in Oregon, Utah and Idaho—announced a plan to affiliate with the company that conducts Blue Cross and Blue Shield business in Illinois and Texas: Health Care Service Corporation.

Recently we took a significant step toward making those plans a reality when we formally requested our state regulators to approve our plan. This step is an important one because we believe that the affiliation is going to benefit all of our members.

A company’s ability to provide value to its customers is the key to long-term success. The affiliation we’re joining is unique because it yields the advantages of larger scale while preserving the benefits of local responsiveness and leadership.

In other words, the Regence Group/Health Care Service Corporation affiliation will improve our ability to compete with large, national, for-profit health plans without losing our local, community-based, not-for-profit commitment—a definite value to all our customers.

How our affiliation will benefit our groups

Nearly all major causes of rising health-care costs are largely outside the health plan’s control: the aging of the population, the advent of new technologies, the explosion of breakthrough medications (and the consumer demand for them), and the regulations and benefit mandates passed on by lawmakers. The net effect is a significant increase in the cost of coverage.

A time like this calls for a new approach to the way we do business. When those other costs are spiraling upward, our members have a right to expect us to do all we can to keep in check the costs we can control. And, they have a right to expect us to create new solutions that will make health-care coverage as accessible and affordable as possible.

The affiliation will help us meet that challenge. It will result in more efficient administration than we could accomplish on our own. It will free up resources for information technologies that will improve the service we provide to our members and or participating health-care professionals. And it will allow us to invest in programs to ensure that we’re effectively managing health-care costs.

And it will accomplish those things without losing a critical quality our customers have come to depend on from us: local responsiveness, local leadership and a local commitment to the communities we serve.

How it will work

The affiliation will spread administrative costs across a much larger base (10 million members in seven states) by integrating back-office functions such as: information technology (electronic data processing services, automation of medical policy for ease of claims processing, computer services); human resources administration; procurement and telecommunications; legal, compliance and internal office functions; corporate development; claims operations; and, finance including treasury, cash management, actuarial and payroll services. These are functions that are essentially invisible to our customers, but we can achieve significant savings when we integrate them.

What will remain local are all those ways we directly interact with our you and our members. These include provider relations and contracting, provider network management, medical management, marketing and sales, community affairs, local customer service and state legislative and regulatory affairs.

What makes it unique

We have begun the regulatory review process to affiliate, not to merge. Regence BlueShield will continue to exist. In fact, this affiliation is an extension of the model we’ve been developing with The Regence Group for several years. It preserves the local nature of our company—in part by maintaining our local board of directors, composed of community leaders here in Washington.

Our approach is different from the approach that other health plans—even other Blue Cross and Blue Shield Plans—have taken. We’re staying true to our not-for-profit roots, while other companies have decided to become for-profit.

We believe that health care’s role in society is different from the role played by other forms of business. As a result, we need an approach focused on what’s best for the local community. As a not-for-profit company, we don’t have shareholders (who would rightly expect quarterly profits and a return on their investment). Instead, we are guided by our partners, customers and members of the local community who have a direct stake in the coverage we provide. That means we can look beyond the next quarter’s financial statement to meeting the long-term needs of the people we serve.

We’re a large business, but our commitment is to our customers, our employees, our partners and our community—not to the financial markets.

We will continue to update you on the progress of our proposed affiliation. If you have questions or concerns, please contact your dental professional relations representative.