Bismarck Tribune Editorial on BCBS (September 10, 2009)

Blues are in need of change

In response to a scathing assessment of overly generous administrative salaries, benefits and expenses, Blue Cross Blue Shield of North Dakota must set out concrete means to return to the values of the businesses and people of the state who struggle to pay ever-higher health insurance premiums.

The report conducted by investigators from the state insurance commissioner’s office revealed that expenses, primarily for compensation, grew by $64 million over five years. It set out bonus payments to the president and CEO of the non-for-profit mutual insurance company that grew 111 percent, or from $204,017 to $431,468, in five years. The incentive pay for the executive vice president of corporate and government operations grew 211 percent during the same period, from $75,693 to $235,360. These are on top of generous base salaries.

The report details a total lack of regard for cost control and the people who pay make co-pays and deducables, a majority of which have some form of BCBS coverage.

Investigators documented annoying disregard for its members including providing heated garage stalls for BCBS’s top six executives.

BCBS has 30 days to respond to the report initiated by state Insurance Commissioner Adam Hamm. That response must include systematic changes in the management and oversight of BCBS, as well as critical review of expenses and rates, with the intention of reducing both. The company needs to make cultural changes in its management, and needs to bring some hard-nosed accountability into play on behalf of members.

No one wants to lose what’s good about the Blues, and there’s much of that. But there comes a point where people will no longer accept being taken for their hard-earned money. And that point has been reached.

The annual meeting of BCBS will be held in December. At that time, the board of directors should offer by-law changes that will ground the board in the frugal values held close by many of its members. This should be done by ensuring the membership has candidates to vote on for the board of directors that seriously represent the interests of members. Eight of the 13 board members are to come from membership. It’s clear the board has become too comfortable with gloss of BCBS’s financial success and the discomfort of policyholders.

North Dakotans have this idea that they are different from everyone else. More frugal. Honest. Accountable. Impervious to cold. The BCBS image as presented by the investigators represents a company with values that look more like Wall Street in New York than Main Street in Beulah. That’s a problem. BCBS had already taken a recent public relations hit in 2009 with the firing of former BCBS president and CEO Mike Unhjem and his

$2.5 million severance package. BCBS needs to be clear in talking about what it will do in the future to avoid extravagant corporate behavior. The problems at BCBS will take a more dramatic fix than putting a new president and CEO in place.

BCBS has become part of the problem of health care reform, and not part of the solution. That must change.