An interview with Jim Elliott and Thad Roake, Vice Presidents, Mid & Large Business Sectors
What convinced you to join Blue Shield and leave your successful careers at Blue Cross?
Jim: First of all, I think we both feel that Blue Shield is poised to make a lot of exciting changes, and we saw the switch as a great opportunity to help lead those changes. We've also been given broader control over the mid and large group markets at Blue Shield than we had at Blue Cross, which brings new and interesting challenges. Blue Shield's smaller size, California focus and not-for-profit status were also deciding factors.
Thad: Jim and I like to build things, and we drove a lot of change at Blue Cross over the years, but the organization has grown so large. When WellPoint (Blue Cross) merged with Anthem in 2004, it became part of a 40,000 employee company based out of Indianapolis. Blue Shield is a much more manageable size, and its leadership and employees reside locally in California. The idea of being part of a smaller, tighter knit management team with a shorter chain of command was very attractive to both of us. It means that Jim and I can play a major role in the company. It also enables Blue Shield to be more entrepreneurial than Blue Cross and other larger carriers.
What advantage does a California-based company have over an out-of-state carrier?
Jim: When you have plans in multiple states like some of our competitors do, you often make decisions based on what will work for all the plans in all the states, instead of focusing on what works best for California. At Blue Shield, our heart and energy is directed toward California employers and healthcare consumers and creating products and services that they want. California is our sole priority, and we know the market inside and out.
How does Blue Shield's not-for-profit status make a difference in your work?
Thad: When you work for a for-profit organization, the first lens you look through is what is good for the shareholders. It really affects your decision making. As a not-for-profit, Blue Shield strives to do good things and not just be a gold stock that lines the pockets of its shareholders. We can make decisions based on what is good for our customers -- producers, employers and members -- instead of worrying about Wallstreet and a promise of 15% annual EPS growth.
What has impressed you most about Blue Shield since you've arrived?
Thad: Before we came to Blue Shield, I think Jim and I mistakenly assumed that Blue Cross' leadership and sales management teams were superior to Blue Shield, but that's not what we've found. We inherited some strong people on our teams who are very, very smart and highly qualified. As a whole, the people at Blue Shield are an outstanding, hardworking, dedicated and very motivated group who can take this company very far given some modest changes.
What kind of changes?
Jim: Blue Shield has all the right ingredients to be successful, including outstanding people, superior products and established networks. Our systems, however, need to be improved, and we need to adopt some new tools to manage business better and make life easier for our customers. Right now, we are looking at ways to better organize and deploy our sales teams and to improve our data management and reporting capabilities. Our newest sales tool, salesforce.com, will help along those lines.
Thad: We also need to immediately improve what we present on our new business and renewals that made producers so unhappy. We want to establish a pricing discipline that will create stability and transparency and be honest and straightforward. This will give employers the tools they need to make good financial decisions. Low cost and ease are the twin pillars of Blue Shield's mission and part of Blue Shield's plan to reinvent itself.
How does the entry of national carriers, like Cigna and Aetna, affect the marketplace?
Thad: The California healthcare market isn't growing. If anything, the number of potential health plan members has plateaued or declined over the past few years. Nevertheless, California is still considered a key market, and carriers that don't have a hold in California aren't going to survive. That's why we are seeing Cigna and Aetna aggressively targeting California. United Healthcare also returned to the California market when it bought out PacifiCare. To get business, new competitors typically cut their pricing, often below break even points. This leads to the pricing instability we are witnessing now. It's a simple supply and demand equation.
Why should employers choose Blue Shield if the competition is undercutting prices?
Jim: Unsustainable low prices may benefit employers in the short term, but not in the long run. Eventually, these carriers are going to have to raise their prices to at least meet their expenses. Down the line, employers may find themselves having to change carriers and deal with all the confusion and inconvenience that goes along with such changes. Blue Shield is the better, more stable, rational choice for employers looking to control healthcare costs while offering their employees quality healthcare coverage. We can play on the historical strength of our networks and the breadth and depth of our discounts to create new and better products. We also think we can offer better service than our competitors because we are California-based and focus solely on the healthcare needs of Californians, as we talked about earlier.
What are your top priorities or goals for 2007 and beyond?
Thad: I see them grouped into three major categories:
1. Restoring confidence in our relationships with producers and employers;
2. Creating a more stable, competitive pricing strategy; and
3. Restructuring our teams to better serve our customers -- producers, employers and members.
We need to start by fixing new business and renewal pricing as we discussed earlier. We also need to demonstrate that Blue Shield is a stable, disciplined, new organization. Our customers must come first in everything we do, and we must strive to earn their trust each and every day.
Jim: Our overall goal is to drive membership growth and become a high performance organization. Relationship building, improved systems support and better organization are just a few of the strategies we are working on to get us there.