Blue Cross Blue Shield CEO Tresnowski calls for insurance reform - Blue Cross and Blue Shield Association; Bernard R. Tresnowski - Interview

Healthcare Financial Management, Nov, 1993 by Richard L. Clarke

The Blue Cross Blue Shield Association is the coordinating organization for the 70 independent Blue Cross Blue Shield plans across the United States. In an interview with Richard L. Clarke, FHFMA, president, Healthcare Financial Management Association, Bernard R. Tresnowski, Blue Cross Blue Shield's president and chief executive officer, addresses the issue of healthcare reform, some of which he believes may be implemented as early as next summer. In addition, Tresnowski discusses the need for insurance reform, offers reasons why some Blue Cross plans have failed, reinforces his belief in the benefits of administrative simplification, and emphasizes the strengths of linking financing and delivery.

Clarke: Please describe the relationship between the Blue Cross Blue Shield Association and its local plans.

Tresnowski: The Blue Cross Blue Shield Association is a membership association and, in many ways, is similar to most trade associations. The fundamental difference is that the Blue Cross Blue Shield Association, in addition to conducting traditional trade association business such as communications, meeting arrangements, and member services, also owns the service marks and the name, Blue Cross and Blue Shield, and licenses the member plans to use those service marks.

Each member Blue Cross Blue Shield plan is an independent corporation. It operates within the framework of special enabling acts within the states in which it is located. It is responsible for its own behavior and its own debt. That is a point that is often forgotten, because we share a common name. Some people believe that there is a "national Blue Cross" and that I am the national president of this enormous organization. That is not true. I am the president of an association of members, who are independent corporations, much like most trade associations.

Beyond that, the plans have given to the association other responsibilities that generally are not characteristic of a trade association. The association is the contractor with the government's Office of Personnel Management (OPM) for the delivery of the Federal employees health benefit program. And we carry that responsibility under power of attorney from each of the individual Blue Cross plans to contract with OPM. We then enter into a participating and underwriting contract with each of the plans to deliver the benefits under the Federal Employee Program (FEP).

The FEP is the largest private health insurance contract in the world. It is a $6 billion dollar annual premium, the biggest piece of business that we have at Blue Cross Blue Shield and is administered by the national association. We have 150 employees in Washington, D.C., and we have an operations center through the Washington, D.C., Blue Cross Blue Shield plan that we use to actually do the transaction processing under FEP.

We operate a national employee benefit program for a large number of member Blue Cross Blue Shield plans, a pension program, a life program, a life insurance program, a disability program, and a 401K program. We operate an interplan bank arrangement whereby, for example, if a subscriber of a plan in New York City gets sick while visiting in Florida, the Florida plan will take care of the benefits for that individual.

We run a private wire system, called an interplan communications system (ITS), that links every Blue Cross Blue Shield plan. ITS is a set of software packages that allows plans to communicate on a real-time basis, computer to computer.

We also represent our membership in Washington, D.C. We are the lobbying arm of the Blue Cross Blue Shield Plan.

In addition, the association has been the Medicare Part A prime contractor with the Secretary of Health and Human Services since 1966. The Blue Cross Association, one of the predecessor organizations to our current association, was nominated as the intermediary for the Medicare program by the American Hospital Association. We, in turn, under that program, contract directly with the Secretary of HHS and subcontract with the member Blue Cross Blue Shield plans that deliver Part A benefits.

Clarke: Part B benefits are not included?

Tresnowski: Since we merged the Blue Cross Blue Shield Associations in 1982 shortly after I took over as CEO, we have provided support services, such as organizing and negotiating their contracts, to the Part B carriers, even though we are not the prime contractor.

Clarke: Healthcare reform is President Clinton's most pressing domestic priority. What are the major reform elements that the Blue Cross Blue Shield Association would like to see included in such a reform plan?

Tresnowski: We would like to see four things. First, we are in favor of reform of the insurance industry itself. As a result of increased competition and escalation in costs, insurers are using classical insurance techniques to compete, such as risk selection and preexisting condition clauses. Many of these practices may be perfectly legitimate for casualty insurance carriers, but in the healthcare arena, they are not as legitimate. This is particularly true in our case because state regulations force us in the direction of being the insurer of last resort. As there is more risk selection, our risk pool continues to deteriorate and our rates reflect that deterioration.