Playing with the big boys: competition is heating up among health plans to attract large national accounts.

Key Points

* Many large employers are forgoing several regional health plans for one or a few insurers with a national network.

* To attract large accounts, insurers need to have a national account competency in place and be able to cater to each employer's needs and problems.

* Consumer-driven health plans are becoming a popular option for larger employers, although they're rarely offering them as a full replacement.

International coffee purveyor Starbucks Corp. recently changed from working with multiple regional health insurers across the United States to selecting one with a national network, plus three regional plans.

After Starbucks, which began offering health benefits to employees in 1988, selected Aetna Inc. as its national provider, the insurer was able to expand with Starbucks' growth in the United States, said Annette King, director of benefits for the Seattle-based company.

Having a primary insurer with a national network offers Starbucks' employees the ability to move from location to location while maintaining the same coverage, King said. "There's no need to choose from new plans, satisfy a new deductible or learn differences in coverage simply because of a move. Working with a single provider, she said, allows the company to have consistent delivery of service, effective communication with users and service where its stores and employees are located. While Starbucks has forgone many plans for a single national insurer, it's opted to retain three regional plans, including a small regional HMO in central Pennsylvania and two local plans in Hawaii.

"Some larger companies have moved away from the 'let's pick the best of market plans" in an attempt to get administrative efficiency and one administration platform and provide programs to all employees, and retirees if applicable, nationally through the program," said Don Giancursio, senior vice president of sales and marketing for Sierra Health Services in Las Vegas.

Insurers are reaping benefits too. "We've seen a number of employers move away from maintaining multiple benefit programs with competing carriers to more streamlined, consolidated carrier options. And we're picking up market share from those changes as well," said Kathy Dunmire, vice president of major accounts for Blue Cross and Blue Shield of Minnesota.

The Race Is On

With moves to one or a handful of insurers with a national network, the competition for large national accounts is heating up.

"These contracts don't come up that often and they tend not to change," said Mark Halvorson, vice president of business development for Medica, a nonprofit health plan based in Minneapolis. "And even though there are fewer health plans today, because of consolidation among big plans, when large cases come up, competition has become dog-eat-dog."

Some in the industry believe the current flat economy is reshaping the competitive landscape for large national accounts. "As the economy grows flat and businesses grow less, we feel that impact, but we still have opportunity to make that up through market share,' said Dunmire.

Bill Tait, corporate vice president of sales and market operations for Humana Inc., said the current economy is having little effect on health plans' battle for large accounts. Instead, increased merger and acquisition activity among plans, along with "fewer competitors capable of competing in this space," is driving competition, he said.

Often, major national health plans have an upper hand when it comes to acquiring large national accounts because of their size and scale. But regional providers aren't giving up the fight. "Administering health plans for national business has been a core competency for us and we've been in the market for more than a decade," said Dunmire. Nearly 65% of Minnesota's Fortune 500 companies are on the Blue plan's book of business. Dunmire said the plan's key to attracting large employers centers on meeting changing market expectations, particularly concerning population health management; introducing innovative network strategies and having a more centered focus on consumer activation. "National employers are focused on implementing complete solutions and opportunities that are much more data driven and innovative. They must pull all levers available to them to manage their costs," she said.

Some regional players are feeling the pressure of coming up against national plans. Several years ago, Medira teamed up with UnitedHealth Group to extend its reach into the large national market. "As a regional plan, we would be going backward if we didn't have our relationship with UnitedHealth. We wouldn't have even seen the bids for many of our contracts. Because of our ability to offer a national best-in-class product, we're now brought to the table," Halvorson said. "If regionals aren't hooked up with a big national network, and one of the better ones, they'll see shrinkage." Halvorson said it's difficult for large employers to make any changes operationally and administratively to a new carrier. "So they've been demanding on what type of performance they expect from a new carrier." That performance includes what networks can deliver as far as value, what discounts they can get and how well companies can Fred their sickest individuals and counsel them through disease management programs or high-care management.

While Sierra Health also feels the pains of competing with national players from time to time, Giancursio said "often we win more than we lose" He said the company comes up with solutions for customers, depending on the products they purchase, to have access to national networks. "The national network is a big calling card those companies bring to a company as opposed to small regional or state-specific plans like ours that typically are confined to the service area in which they operate" He said Sierra Health's answer to the challenge is to offer products that allow people to have more than just an HMO choice in several states.

Sierra Health is bucking the trend of the national economy, said Giancursio. With Las Vegas' unemployment rate below the national average and some industries having trouble Filling jobs, along with many gaming-expansion and residential-community projects on the drawing board, it's opening up a huge opportunity for the company to add additional new national accounts to its book of business.

There's a give-and-take in today's competitive market. For instance, this year Medica and UnitedHealth acquired thousands of potential new members nationwide when the companies won the Target Corp. account over Blue Cross and Blue Shield of Minnesota. However, when Northwest Airlines decided to go with one plan as part of its financial restructuring, the Blues plan became the sole insurer over Medica and UnitedHealth for the airline's 30,000 employees in August.

Making the Move

Acquiring nationals is a fairly large process, said Minnesota Blues' Dunmire.

"Small business employers tend to shop more frequently, but larger companies tend to work off three-year strategies and have a greater persistency than many smaller businesses" Dunmire said. "From a sales process standpoint, we typically work six to 18 months to bring a client on board, and work directly with customers in terms of what their strategy is, along with working on a joint basis with consultants they may hire to run the [request for proposal] process." She said many of the sales opportunities aren't based on bringing a product to market but rather on providing solutions. "We're very oriented to clients' benefits plans, issues, [benefits and compensation] strategy and solutions to fit that model."

Humana's Tait said the company has a philosophy that no carrier can be all things to everyone. "Most successful companies have a very disciplined process around staying focused on where a good strategic fit is and who its long-term partners are. We stay away from what's not a good fit," he said. "We try to figure out what types of prospects and clients meet our strategic direction and organizational capabilities and try to partner with them for a long-term relationship." He also said it's important to have the right team of account executives who are knowledgeable leaders or good strategic business thinkers as opposed to just product sellers.

Many of Sierra Health Services' large accounts are acquired through national consulting houses, said Giancursio. Currently approximately 18% of Sierra Health's membership resides in national accounts, including such household names as Lowe's, Kmart and TJMaxx.

Land of Opportunity

The national account segment provides real opportunity for health plans, said Jon Rubin, chief financial officer of Cigna HealthCare.

Large employers tend to be innovators, said Rubin. "They have benefit managers who think strategically about employee benefits solutions to both drive improved health outcomes for their employees and to achieve a more sustainable cost level." National accounts comprise nearly 40% of Cigna HealthCare's total membership.

Large employers are also an important part of Blue Cross Blue Shield of South Carolina's book of business. "We live or die by those accounts," said President and Chief Operating Officer Tom Faulds. He said the Blue Cross Blue Shield Association's BlueCard Program helped the Blues plan penetrate the large group segment. The program allows Blues plans to serve large national accounts by linking participating health-care providers and Blues plans through a single electronic network of claims processing and reimbursements, thus increasing network availability on a national basis.

Large employers are now enjoying even more choices--a byproduct of increased competition in the market. They're also discovering that moving to one or few national network plans provides additional cost savings, such as lower administrative fees.

Wish List

One of large employers' most recent choices about their health plans is consumerism as part of the quest to make employees take more ownership of their health-care spending.

"Large employers' needs and sophistication around what they want tend to change every three to five years as the industry creates better alternative solutions," said Humana's Tait.

A 2005 Mercer Health & Benefits LLC annual national survey of employer-sponsored health plans found that much of the growth in implementing consumer-directed health plans took place among the nation's largest employers.

"The national segment provides the largest near-term opportunity for consumer-directed product growth," said Cigna HealthCare's Rubin. He said a large portion of Cigna's 2007 requests for proposals are from large employers who are "at least entertaining proposals for consumer-directed health plans and a broader suite of consumer-focused capabilities"

Many of those employers are looking to add CDHPs as an option to their menu. Unlike many small and midsize employers that are now offering consumer-directed products as full replacement plans, many larger employers are still only offering them as options. "But it's a staged approach for many customers, and over time, we expect consumer-directed options to take further hold in those relationships,' said Rubin.

One of the most recent changes in the large national account landscape is that a growing number of companies are moving away from copay-based programs to deductible coinsurance-based programs to provide some incentive for members to have an interest in health-care costs, said Minnesota Blues' Dunmire. The company has seen a rise in consumerism products by large accounts. Of its 170,000 members enrolled in a CDHP plan, about 50% come from larger employers.

The Crystal Ball

Health plans believe large national accounts will continue to be a big part of their business.

"There's heightened awareness at the executive suite in terms of costs of benefits and the impact it has on business. Human resource executives are more aggressive in introducing new innovations, and we expect to see continued emphasis on incentive-based designs and programs like tying HRA [health reimbursement accounts] or HSA [health savings accounts] contributions to competition of HRAs [health risk appraisals]," said Minnesota Blues' Dunmire.

She said the key to competing effectively in the large national account market is to have a national account competency in place.

Plans need to identify and cater to each employers' needs and problems, said Medica's Halvorson. "You can't just create a solution that will work for a broad number of cases. They're all on different stages of what they're trying to accomplish with their health-care strategy, and the key is to understand each account."

Learn More

Blue Cross and Blue Shield Of Minnesota

A.M. Best Company # 60077

Distribution: Internal agents, independent agents, direct

Blue Cross Blue Shield

Of South Carolina 

A.M. Best Company # 01727

Distribution: Independent agents, brokers, consultants, direct sales representatives, direct

Cigna HealthCare

A.M. Best Company # 68124 (Cigea Insurance Group)

Distribution: Agents and brokers

Humana Health Plan Inc.

A.M. Best Company # 68868

Distribution: Agent/brokers, direct to employees, direct

Medica Health Plans A.M. Best Company # 68559

Distribution: Agents, brokers, consultant, direct sales force

Sierra Health Services Inc.

A.M. Best Company # 07370

Distribution: Agents, internal sales staff, direct

For ratings and other financial strength information about these companies, visit www.ambest.com.