Why the Blue Cross Sale failed, again

Blue Cross, Blue Shield is Louisiana’s largest health insurer, and one of the state’s largest employers. A major effort was undertaken by the Blue Cross Board to sell the whole system to a company called Elevance Health located in Indianapolis Indiana. Elevance is no new kid on the block, and has gobbled up Blue Cross companies in fifteen other states, making it one of the largest healthcare operations in the nation.

But the acquisition ran into problems from day one. Elevance Health has received a series of fines in seven other states totaling more than $26 million, and that did not set well with many observers. Others, including the governor of Louisiana, tried to jump into the mix and have influence even though they had no authority to do so. But the bottom line was this. Policyholders in Louisiana we’re OK with the present Blue Cross system, and were reluctant to rock the boat. The present Blue Cross leadership never offered any solid reasoning as to why any change should be made.
Now I know something about the Blue Cross operations. You see, when I was insurance commissioner back in the early 1990s, I discovered massive mismanagement and waste. Blue Cross back then had turned over complete management to the Mississippi Blue Cross organization. The Louisiana board just sat back and let the Mississippi organization pretty much do what they wanted. And they really stuck it to Louisiana policyholders.
One of the key roles of the insurance department in Louisiana is to examine companies doing business in the state. Make sure that they are on a strong financial footing, investing their money properly, and are always in good shape to pay any claims from Louisiana policyholders. But the Louisiana board back then, in conjunction with the Mississippi board, had the previous insurance commissioner under their thumb. The department just did not pay attention to Blue Cross, letting the company operate any way they wanted.
A typical example was the misuse of the Blue Cross airplane. It was kept in Mississippi and used exclusively by Mississippi executives, but was fully paid for by Louisiana policyholders. And boy did they ever use that plane. It made numerous trips worldwide, including golf outings to Scotland. Inflated salaries we’re paid to Mississippi officials who’s work had nothing to do with servicing Louisiana Blue Cross policyholders.
The buck stopped at one place to bring the various shenanigans from Mississippi to an end. With me. I called the Mississippi Blue Cross company executives in, and confronted them with a long list of mismanagement concerns. When the Mississippi officials saw that the jig was up, they immediately resigned and basically handed me the keys to the company.
Now, remember that I was a new commissioner learning as I went along, and certainly had no experience with taking over what was then the largest employer in Louisiana, and by far the largest insurer. I researched just what authority I had, and determined that it was my job to appoint a new board to run this fragile Louisiana company. I thought about hiring a national firm to make recommendations, but it just didn’t make sense to bring it a bunch of outsiders to take over. We seem to do that way too often and Louisiana.
After checking with a cross-section of healthcare professionals in the state as well as numerous successful business operators, I put together a board of medical professionals, some good business minds, and a balance of diversity that at the time made sense to me. For the first several years, my staff and I kept close watch on the company, regularly calling in the board for justification of many of their decisions. But as time went on, it was obvious that they had put together a good business plan, and were running a first rate company. The insurance department received few complaints, and Blue Cross has been a solid operating business in the state for a number of years.
The bottom line In the recent acquisition failure was simply this. Current policy holders are satisfied. There was just no reason to rock the boat. And that makes good sense to me.

Peace and Justice

Jim Brown

Jim Brown’s syndicated column appears each week in numerous newspapers throughout the nation and on websites worldwide. You can read all his past columns and see continuing updates at http://www.jimbrownusa.com.  You can also listen to his weekly podcast at www.datelinelouisiana.com.

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