Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, November 14, 1993 TAG: 9311120076
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Long
Many people, concerned about the drain of company headquarters and jobs from the Roanoke Valley, feared another big pullout after the departure of Norfolk Southern Corp. and attempts to acquire the former Colonial American National Bank.
Few felt completely reassured even by the promise of the merged company that it would retain a major presence in Roanoke, where Blue Cross and Blue Shield of Southwestern Virginia had served this region, despite consolidation of headquarters in Richmond.
At that time, some 500 employees worked at the Blue Cross building at Jefferson Street and Franklin Road downtown.
Today, however, 927 people work for Blue Cross in Roanoke, and its offices have spilled over to the First Union, Signet Bank and Franklin Plaza buildings. In addition, the company employs another 19 temporary workers.
That 85.4 percent jump has vaulted Blue Cross past the federal government to become Roanoke's fifth largest downtown employer (behind Carilion Health System, the city of Roanoke, Appalachian Power Co. and Norfolk Southern Corp.)
Of the permanent people in Roanoke, 32 are corporate employees and 895 work for the health insurance company's various lines of business that are based here.
Most work in customer service, but there are also managers, computer programmers and financial analysts. Blue Cross has hired some who lost jobs at Dominion Bankshares Corp. after it was acquired by First Union Corp.
Blue Cross's Government and Individual Business Center in Roanoke also is directly responsible for 80 people in Richmond and 43 in West Virginia, for a line-of-business tally of 1,018 employees.
Blue Cross has a 40 percent share of the health insurance market in Virginia, Berry said.
The Roanoke operation accounts for 25 percent of the revenue and 25 percent of the employees of Blue Cross and Blue Shield of Virginia.
The growth in Roanoke has helped make Blue Cross and Blue Shield of Virginia the nation's 13th largest insurance company.
Blue Cross in Roanoke achieved this stunning increase by growing its own business.
John Berry, executive vice president in Roanoke for government and individual business, recalled that both Roanoke and Richmond at first handled employee group and Medicare supplemental policies.
Roanoke was then, in essence, a satellite of the Richmond operation.
What Berry called "the key decision" was made in 1988. It was to divide the company into strategic business units.
Richmond took the employee group insurance program and Health Maintenance Organization (HMO) business.
Roanoke assumed responsibility for federal government insurance plans and insurance sold to individuals.
The latter breaks down into policies for individuals under the age of 65, Medicare supplement (Medigap) policies for those over 65 and college student policies that are sold on campuses.
"We're a little surprised at it ourselves," Berry said.
In 1988, he said, the Virginia plan was not ranked on national lists of top-selling companies.
In 1988, Roanoke had 240,000 insurance contracts. Today it services 335,000 contracts, with the major grow beginning with changes in 1990.
In that year, Blue Cross and Blue Shield developed what it calls Showcase, a five-year strategic corporate plan to "position the company to thrive with good products and good service."
"We stuck to it and it worked," Berry said.
The company engaged in market research and focus group interviews.
Customers said health insurance was too expensive. And while they said it was obvious that Blue Cross employees cared about helping them, they had problems reaching the proper person about claims.
Blue Cross also listened to its employees.
They wanted to treat customers the way they would like to be treated, but they had some problems.
Supervisors walked the floor and listened to workers say what they needed to do the job right.
Out of that study came the team concept of marketing and servicing policies. Business was divided into four separate lines - insurance for people under 65, over 65, college students and federal employees - each with an officer in charge.
The company also created the "pod" concept for handling claims. It was designed by Kathy Ashby Merry, vice president for personal health care in Roanoke.
Prior to 1990, employees were assigned to office spaces according to function. People who handled calls about claims worked together on one floor; nurses, who are responsible for medical questions, were on another floor.
In this functional configuration, Merry said, customer service representatives knew only what was on their computer screens concerning a caller's claim.
As a result of the study of customers and employees, she said, people with different functions were assigned last November to work together in a pod, or cluster of desks.
Blue Cross created a multitude of pods. But once customers reach a pod about a claim, they will always be directed back to the same group - the people familiar with their cases. They usually reach the same person every time they call.
If a claim involves a medical or rating question, the claims person merely hands the phone to the nurse or underwriter sitting at the next desk.
Customers, in short, no longer get the run-around of having to explain the problem to a new person with every call.
The teams, Berry said, produce timeliness, accuracy and accessibility. They also lowered operating costs because "good service is cheaper than bad service."
He calculates that claim servicing costs dropped 13 percent, while service improved by 16 percent in terms of accuracy, timeliness of response and timeliness of claims payment.
Berry said ratings of customer approval rose dramatically. So did business as the word spread.
The fact that the teams are cheaper also helps keep down the price of insurance, Berry said. He figures the savings are due 80 percent to greater efficiency and 20 percent to accuracy.
On a company-wide basis, premiums will remain flat this year after gains of 13.1 percent, 11.4 percent and 9.3 percent in the years starting in 1990.
The cost of individual policies is up about 10 percent, however, because few individual customers use managed care. Berry said Blue Cross and Blue Shield hopes to flatten premium growth by switching more individuals to Health Maintenance Organizations and Preferred Provider Organizations.
The company initially tried a team approach more than three years ago - and failed. Berry said the first attempt was tried with too little employee training - they now get three weeks - and too little leadership. Teams, he explained, need strong leaders to coach and to facilitate discussions.
The second attempt, which Merry was hired to create, followed "a lot of soul searching," Berry said.
Properly trained people relaxed, he said, and teams feel like "a comfortable place to work."
"It took this time," he said of the pods. "It works if you do it right.
Of course, "not everyone here liked being teamed up," Berry said. Many managers didn't like change. Those people, he said, have been transferred to other jobs, principally in support areas.
Blue Cross and Blue Shield also changed the way it sells insurance.
Marketing group policies, the work done in Richmond, requires dealing only with the one person responsible for an employee group plan.
Roanoke, on the other hand, sells 80 percent of its business, the individual policies, directly to the customer. It began direct marketing in 1990.
Berry said it does this without making any speculative "cold calls" to random numbers.
Randy Starns, vice president for sales and marketing development, said it sells through free-standing newspaper inserts, television and direct mail.
The ads give a toll-free number where people can obtain answers to questions and enrollment forms. The center also follows up on people's interest after they receive the application forms.
Although 20 percent of its business still comes through brokers, Starns said, the company found that advertising and direct mail generate the same level of customer interest at lower cost. Berry said direct marketing is 50 percent cheaper than using brokers although some customers prefer to use brokers.
Enrolling by mail from home, he said, "is a comfortable way to purchase insurance."
Of its contracts:
The category for personal health care for people under the age of 65 rose from fewer than 40,000 to 70,000, although the number dropped slightly in 1993. Berry predicted the contracts will rise after redesign of policies for Health Maintenance Organizations.
Blue Cross and Blue Shield has almost half the Virginia market for Medicare supplement policies, up from 126,000 in 1988 to 134,000 now. Its main competitor, Berry said, is the American Association of Retired Persons.
Student policies sold on college campuses in Virginia - where Blue Cross has 80 percent of the market - and eight other states has been the most dramatic increase. Starting with about 5,000 policies, Blue Cross has swelled this segment to 40,000.
The federal employee sector has grown from 80,000 to 100,000, despite declining government employment. The market is limited, but Berry said Blue Cross keeps its business because "we service the heck out of it."
Paul Keyser, who heads the government business, said it's the fifth largest program in the nation in terms of the number of contracts.
Standard & Poor's, the national rating agency, has assigned Blue Cross and Blue Shield of Virginia a grade of AA- or excellent.
Standard & Poor's said the rating denotes excellent financial security and strong capacity to meet policyholder obligations.
Its rating, the agency said, reflects "the company's robust market share in Virginia, excellent earnings, and strong capitalization."
In addition, it said, the company "enjoys a positive relationship with [Virginia's] insurance regulators that has enabled it to receive timely rate increases on its individual business."
Standard & Poor's called Blue Cross "the dominant carrier in Virginia health insurance with about a 35 percent market share."
This share, it said, allows Blue Cross to negotiate large discounts with all active care hospitals and other health care facilities.
Standard & Poor's said the company's profitability has been strong for years and continues to improve as the proportion of managed care business has increased.
Because a large proportion of its investments are in stocks, the agency said, a market downturn might decrease the capital base.
"However, S&P believes that the company has adequate capital to absorb losses and remain within the rating category."
Berry is also proud of the company's civic activities.
The company contributes to free clinics, Child Health Investment Partnership (CHIP), Virginia Caring program, Roanoke City Nursing Home, school partnerships and other health and children's programs.
Berry is active in a wide range of activities from the Roanoke Regional Chamber of Commerce to Total Action Against Poverty, and from the Blue Ridge Regional Health Care Coalition to the American Association of Industrial Engineers.
One question on the horizon is the status of its office space.
Berry said the company has favorable leases on its office space, but these will begin to expire in about three years.
Before then, he said, Blue Cross and Blue Shield must act on the plan to consolidate all of its workers under one roof.
The company likes being in downtown Roanoke where its workers can enjoy the City Market, restaurants and shopping, he said.
A decision will be made soon on whether this is possible, according to Berry.
Franklin Kimbrough, executive director of Downtown Roanoke Inc., said the company has told him it would like to remain downtown but is keeping its options open.
The growth of Blue Cross and Blue Shield, he said, has contributed to an expected downtown office occupancy rate of 92 percent next year.
Memo: ***CORRECTION***