April 15, 2003

Blue Cross and Blue Shield Plans Roaring Back

• Days of pre-HMO Preeminence Returning?
• Blues Myths Challenged

(New York, NY) - Blue Cross Blue Shield (BCBS) plans have reinvented themselves as a significant force in the health insurance world, turning them from a once-perceived public utility into a formidable competitor with national commercial insurers, according to a new study by Conning Research & Consulting.

The study, "BCBS Plans: Roaring Back?" examines how BCBS plans, once slow to react and deeply suspicious of collaborative provider relationships, have roared back. Conning finds the BCBS plans' resurgence has been fueled by conversion to for-profit businesses, changing their status into "super blues," and becoming havens for consumers fleeing from highly managed programs to the less-structured BCBS products.

"The plans are challenging the myths of the Blues," said Robert H. Booz, Vice President of Health & Managed Care for Conning Research & Consulting. "The landscape has changed again and, with it, there is a perceived resurgence of BCBS plans. We undertook our analysis of statutory reporting results for 2001 to determine if this perception is real."

The Blues myths, according to Conning, are:

1. "BCBS plans continue to follow the market rather than lead it."
   
   Reality 1) Conning's analysis reveals enviable financial performance by BCBS plans that leads the industry, and, in the case of net income, is better than the industry as a whole. This system strength raises the bar for all health companies.
2. "BCBS plans need to be for-profit and publicly traded to achieve strong financial performance."
   
   Reality 2) Our analysis found that, within the BCBS family, mutual companies performed as well as or better than their BCBS stock or publicly traded counterparts. Not-for-profit plans also showed strong and consistent performance.
3. "BCBS plans, while successful in their local niche, can't compete with larger, national players."
   
   Reality 3) Our analysis found that this myth is simply that-a myth. In head-to-head comparison between BCBS organizations and their non-BCBS counterparts, the BCBS plans had better financial results.

"BCBS Plans: Roaring Back?" uses statutory reporting, which, unlike GAAP, offers greater granularity, and comparability of health plan performance. This study rolls up individual health plans reported state-by-state into common corporate ownership groups. It also provides data arrayed by organizational business structure. The study includes analysis of 39 separately reported financial indicators from 2000 and 2001 reported results. The calculations include seven key metrics arrayed across organizational type to examine the role of corporate structure on performance and compares BCBS plans to their commercial counterparts.

"BCBS Plans: Roaring Back?" is available from Conning Research & Consulting, Inc. by calling (888) 707-1177 or by visiting the company's website at www.conningresearch.com.

About Conning Research & Consulting
The Conning name has represented excellence in independent insurance industry research for more than 90 years. As a result of its wealth of experience and intimate knowledge of the insurance industry, Conning understands industry challenges and opportunities and can provide in-depth insights and analyses. Conning provides both public and proprietary research as well as consulting services to the financial services industry. Conning has offices in New York and Hartford.

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