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At Blue Cross and Blue Shield of Kansas City, we’re listening intently to your thoughts and concerns about health care and the proposed reforms now before Congress. In this fifth in a continuing series, we’d like to take the opportunity to address some of the key issues surrounding this complex and rapidly evolving issue.

What is a Public Option?

• Some House and Senate bills call for a panel of health insurance options to be made available to both the insured and uninsured.
• These options might include coverage plans from Blue Cross and Blue Shield, Aetna, Coventry, United, and “a Public Option,” which would look like Medicare.
• State Insurance Exchanges would oversee this panel of health insurance options to certify that the rates and benefit designs comply with health reform standards.
• The stated purpose of a Public Option is to keep health insurance companies “honest” and to reduce costs through “more competition.”

Is a Public Option Necessary for Health Insurance Reforms?

A Public Option is not necessary to implement health insurance reforms like:

• The guaranteed issuance of coverage;
• The ban on pre-existing conditions; and
• The ban on using health status to set rates.

These health insurance reforms are supported by the health insurance industry and other groups such as the American Medical Association and the National Association of Insurance Commissioners.

Is a Public Option Needed to Keep Health Insurance Companies “Honest”?

• Our company is regulated by the Kansas and Missouri Insurance Departments and numerous federal agencies.
• Our service to customers, physicians and hospitals has the highest ranking in Kansas City.
• We invest heavily in our community with dollars and volunteer service.
• We have the number one market position in our community because we are considered “honest.”

Why is Blue Cross and Blue Shield of Kansas City Opposed to the Public Option?

Blue Cross and Blue Shield of Kansas City opposes a Public Option because critical questions are not being answered:

• Would a Public Option have a negative impact on physicians and hospitals by paying less than private insurers pay for the same services? Would there be fewer physicians and hospitals to serve patients on the public option and thus actually decrease the choices for those patients?
• Would a Public Option be run on a financially sound basis? Or would it be allowed to accrue losses that would add to the federal deficit?
• Would so many private insurance policyholders switch to the lower cost Public Option that private insurance companies would go out of business thus limiting the choice of health plans for employers and individuals?
• Would there be a level playing field? Would the Public Option be exempt from federal and state taxes? Would it be exempt from solvency and reserve requirements? Would it be exempt from state mandates and other provisions that add regulatory costs to private insurance?
• How would the government assure fairness if it has the dual role of regulating while competing in the insurance market? Would it create unfair competition?

Can a Public Option Work?

The current House and Senate bills have different definitions of a Public Option. We believe the promises for more choice and lower costs are illusory, and, therefore, we have serious concerns about how it will affect the future of health care in America.

Yours truly,

Tom Bowser
President and Chief Executive Officer
Blue Cross and Blue Shield of Kansas City

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At Blue Cross and Blue Shield of Kansas City, we’re listening intently to your thoughts and concerns about health care and the proposed reforms now before Congress. In this fourth in a continuing series, we’d like to take the opportunity to address some of the key issues surrounding this complex and rapidly evolving issue.

Are Insurance Company Profits the Reason for the High Cost of Health Care?

Blue Cross and Blue Shield of Kansas City was formed 70 years ago as a not-for-profit health insurance corporation to serve our members and community.

• As a percent of revenue, our profits have averaged 1-1/2% to 3% over this 70-year period — about the same margin as your neighborhood grocery.
• Like so many businesses, we have our good years and bad. Twenty of our last 40 years have resulted in operating losses.
• It’s also worth noting that half of our reserves, or $250 million, is a required set-aside by the State of Missouri to ensure that we have adequate funds to cover a variety of unpredictable circumstances, like an H1N1 epidemic.
• We are not publicly traded or investor-owned, thus, we do not pay dividends. For these reasons, we do not believe that our company profits are unreasonable in amount or purpose.

Wouldn’t a Public Option Insurance Program Be More Cost Efficient Than a Private Insurance Company?

• If you do an “apples to apples” comparison between Medicare and Blue Cross and Blue Shield of Kansas City, we stack up very well.
• We spend 13% of the premium dollar for “administration,” which includes salaries, information technology and facilities.
• Medicare, which would probably be a model for a public option plan, spends a similar amount, when all relevant components are included.

Is there Adequate Competition in the Insurance Market?

• In the Kansas City area, at least eight insurers compete for individual direct pay members, and more than 10 insurers compete in the small group market.
• In the Medicare Supplement arena, there are more than 50 insurance carriers in the Kansas City market. Nationwide, more than 1,200 insurance carriers compete for business.
• We believe better collaboration among private insurances can address many of the concerns expressed in the current health reform debate.

Yours truly,

Tom Bowser
President and Chief Executive Officer
Blue Cross and Blue Shield of Kansas City

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At Blue Cross and Blue Shield of Kansas City, we’re listening intently to your thoughts and concerns about health care and the proposed reforms now before Congress. In this third in a continuing series, we’d like to
take the opportunity to address some of the key issues surrounding this complex and rapidly evolving issue.

Do You Deny Coverage for the Sick?

• Our company accepts 85% of all individual applicants for coverage and 99% of all applicants when group and individuals are combined.
• In addition, we offer a special 10% discount for those individuals who take care of themselves and are healthy — it makes good sense to offer an incentive to people who take responsibility for their own health.
• Once individuals have been accepted into our insurance pool, coverage is guaranteed for as long as premiums are paid, provided the individual has been honest on his or her application. We do not and cannot cancel their coverage if they become ill.

Do You Deny Claims to Increase Profits?

Absolutely not.

• We pay all claims which are covered within our agreements, and state regulators review our compliance with these contracts.
• Ninety-nine percent of all our local claims are paid within 30 days.
• Members can appeal any denied claim and receive a full and fair review.

As a not-for-profit company, we serve our members, not shareholders.

Can I Take My Insurance With Me When I Change Jobs?

• Like other insurance companies, Blue Cross and Blue Shield of Kansas City members of employer groups larger than 20 employees may continue their insurance under the COBRA program, created by an act of Congress. Employees of companies with fewer than 20 employees have similar options available to them through state laws.
• Congress is considering additional reforms to require insurance carriers to accept all applicants and to prohibit rate increases for applicants with health conditions after their 18-month COBRA eligibility expires. We support these reforms.

If Everyone Paid the Same Rates, Would Costs be Lower?

• Moving to one rate for everyone does not lower total costs; it simply redistributes how those costs are allocated.
• In general, younger people would see their rates nearly double while older Americans would see theirs drop by nearly half.
• Health reforms under consideration in Congress do not fully move to one rate for everyone, but they are considering a substantial reduction in the rating classes insurance companies are allowed to use today to set rates.

Yours truly,

Tom Bowser
President and Chief Executive Officer
Blue Cross and Blue Shield of Kansas City

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At Blue Cross and Blue Shield of Kansas City, we’re listening intently to your thoughts and concerns about health care and the proposed reforms now before Congress. In this second in a continuing series, we’d like to take the opportunity to address some of the key issues surrounding this complex and rapidly evolving issue.

Blue Cross and Blue Shield of Kansas City’s Prescription for Health Reform

We have a long-standing commitment to support bipartisan health care reform — this year! At both the local and national levels of the Blue Cross and Blue Shield System, we have proposed extensive solutions, including:

• Dramatic changes to our own industry;
• Changes that will ensure everyone has coverage;
• Changes that will control costs and improve quality; and
• Changes that will build on the private health care system.

Support for Health Insurance Reforms

We support most reforms being considered by Congress, including:

• Coverage for all Americans;
• Reforms for the health insurance industry;
• A requirement that individuals have health insurance; and
• Subsidies for those with lower income.

We oppose the Public Option as unnecessary.

Individual Responsibility

We must become more responsible for our own health.

• Nearly 40% of our annual claims payments of $2 billion goes for the treatment of illness and injury which we bring upon ourselves.
• We must do a better job with diet, exercise, not abusing drugs and alcohol, following physician orders, and buckling up.

Cost Reductions Through Comparative
Effectiveness / Clinical Pathways

• We see great promise in a concept called “Comparative Effectiveness,” wherein physicians and hospitals agree upon “clinical pathways” for treating common medical issues.
• If physicians are given autonomy and control over creating and maintaining these pathways, there is great potential for Medicare and private insurance payment systems to be changed in a way that rewards both physicians and hospitals for improvements in quality and cost-effectiveness.

Malpractice Immunity, Physician Tax Deductions for
Providing Free Care

• We believe there is significant potential for savings in reforming our nation’s malpractice procedures. We should seek better balance of the patient’s right to recovery in case of injury and the need for physicians and hospitals to practice medicine in a cost-effective manner.
• One possibility might be to provide litigation immunity for physicians and hospitals who follow physician-certified clinical pathways. We are pleased President Obama has agreed to examine these possible savings.
• Another incentive to attract new physicians and keep those we now have in practice would be to recognize their critical role in providing uncompensated
  care to many segments of our society.
• We encourage federal and state governments to help improve physician reimbursement by providing federal and state tax deductibility for the free care they provide.

Greater Efficiency in the Health Insurance Industry

The health insurance industry, too, needs to change by becoming more efficient.

• Collaboration with the government on electronic medical records;
• Expanding our nation’s primary-care physician capacity; and
• Improving quality can produce positive results, in time.

We are on the brink of a uniquely American solution to health care financing problems facing all industrialized nations. In charting this new path, we must be respectful of the important role everyone has and be willing to listen to different points of view on how change can be achieved.

Yours truly,

Tom Bowser
President and Chief Executive Officer
Blue Cross and Blue Shield of Kansas City

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At Blue Cross and Blue Shield of Kansas City, we’re listening intently to your thoughts and concerns about health care and the proposed reforms now before Congress. In this first in a continuing series, we’d like to take the opportunity to address some of the key issues surrounding this complex and rapidly evolving issue.

We Support Coverage for All Americans.

• We support the President and Congress in their goal of covering all Americans, and the conclusion that an individual mandate will be required.
• Coverage for the uninsured is a critical element in controlling costs and improving the nation’s health.
• Under present arrangements, insured groups and individuals pay the cost for treating the uninsured, as physicians and hospitals understandably charge paying customers more to compensate for those who can’t or don’t pay at all.
• This inequity translates to family premiums costing $1,000 more per year than they otherwise would at Blue Cross and Blue Shield of Kansas City.

We Support Health Insurance Reforms.

Blue Cross and Blue Shield of Kansas City and our national Blue Cross and Blue Shield Association have long supported most insurance reform measures under consideration by Congress, such as:

• Guaranteeing the issue of coverage — regardless of health status;
• Bans on “pre-existing condition” exclusions;
• Bans on using a person’s health status to set premium rates; and
• Subsidies for those who can’t afford health insurance and meaningful individual requirements to make sure everyone participates, like Social Security and Medicare.

Beyond this public support, we have been working with congressional groups in providing expert assistance to achieve these goals, which will make our industry even more responsive to public needs.

We Support Comprehensive Bipartisan Action.

• Blue Cross and Blue Shield of Kansas City reaffirms our long-standing commitment to comprehensive bipartisan reform of the health care system this year.
• We have proposed extensive solutions and are supporting comprehensive changes to our own industry to ensure that everyone has coverage.
• We support market-based solutions that build on our long service to the Kansas City community.
• Our not-for-profit company was created by local physicians and hospitals 70 years ago to provide affordable hospital and physician services to this community. We stand ready to work with Congress and the White House to continue our distinguished record of service to the Greater Kansas City community and to the nation.

Yours truly,

Tom Bowser
President and Chief Executive Officer
Blue Cross and Blue Shield of Kansas City