"Paul Markovich felt that a time bomb was ticking inside his industry. Each year, the cost of healthcare was rising steadily, while incomes were only inching upward. In 2018, the median income for a family of four in the United States was $65,000. His company's most popular health insurance product for such a family? A package that would cost them $16,000 a year -- a whopping 26 percent of their gross pre-tax income. That was almost three times the cost of such a plan in 1999. In the San Francisco Bay Area, where Blue Shield of California (BSC) was headquartered, the situation was even worse. "If you have a Silicon Valley engineer, it would cost the company more to pay for the health benefits of that engineer [in the United States] than to hire one in India for a year," said Markovich, the CEO of BSC".
Read the full Blue Shield of California Harvard Case Study very carefully.
Discuss the following:
- What are the main drivers of profitability for a health insurer, such as Blue Shield? Will profitability change over the next 10 years?
- Are non-profits in the best position to drive change?
3, Discuss the advantages and disadvantages of integrated insurers-hospitals-clinics, HMOs, such as Kaiser, disconnected insurers and hospitals and providers compared to the ACO model (such as the ACO with Dignity Health and Blue Shield. - What strategy would you recommend to Blue Shield to address the ACA insurance exchanges?
5, What are the drivers of consolidation in the health insurance industry? Should Blue Shield look for additional acquisitions?
Should Blue Shield consider being acquired? California Blue Cross (non-profit) merged into the Anthem-WellPoint for-profit national firm.
Sample Solution