MANAGED CARE Battista questioned on defense of Blue Cross BY STEVEN STYCOS

Facing growing criticism for his financial management of Blue Cross & Blue Shield of Rhode Island, Blue Cross CEO Ronald Battista last week defended the giant insurer’s advertising campaigns, as well as its role in health-care planning and $299 million in cash reserves. Battista also promoted a new insurance product designed to lower health insurance premiums by encouraging healthy lifestyles.

Expensive advertising campaigns, the new "Personal Choices" insurance option, and Project SHAPE, Blue Cross’s controversial health-care planning effort, are all intended to improve health-care in Rhode Island, Battista told members of the United Nurses and Allied Professionals during a November 13 conference at the Providence Biltmore. The company currently provides health-care for about 680,000 Rhode Islanders.

Referring to Blue Cross’s much maligned advertising campaign, Battista said, "We didn’t put up billboards on ‘87-10-3’ to pat ourselves on the back." The campaign, which included extensive newspaper advertising, emphasized that 87 percent of Blue Cross’s premium revenue pays claims, while only 10 percent goes for administration and three percent for reserves. Perhaps administration could be cut to eight percent and reserves to two percent, but the campaign educated the public, Battista says, that those steps would not stop health-care costs from rising.

Another conference speaker, however, said the advertising campaign was misleading. "My only problem with ‘87-10-3,’ " said Ted Almon, CEO of the medical supplier Claflin Company, "is that the 87 consists of a huge portion of administrative costs, too." The clerical workers who process insurance forms in hospitals and doctors’ offices represent a large administrative expense, he noted in arguing that a single-payer system is the most efficient way to provide health-care.

While critics rap Blue Cross’s advertising, they also rage about its $299 million in reserves (see "Blue Cross does what it wants," News, October 3), accumulated, they say, by charging excessive premiums and underpaying doctors. In an interview, Battista said Blue Cross plans to increase its reserves to about $450 million by the end of 2005, or approximately 22 percent of annual premium collections. Two consultants recommended that level or higher, Battista stated. And if the state Department of Business Regulation hired a "Big Five" accounting firm to do an independent analysis, he promised, they would make the same recommendation.

Battista also defended Blue Cross’s entrance into health-care planning. "I would have loved the health department to do Project SHAPE," he said, but because the financially strapped state agency was not studying Rhode Island’s health-care needs, "Blue Cross felt it had to fill that void." SHAPE II is now examining five areas of Rhode Island’s health-care system and plans to issue recommendations within a year, he said. Battista also pledged that Blue Cross will create an independent foundation to oversee future health-care planning. But another speaker, state Senator Elizabeth Roberts (D-Cranston), said she is not ready to transfer health-care decision making from the democratically elected legislature to Blue Cross.

Battista said Blue Cross will soon provide less expensive insurance through "Personal Choices." In January, Blue Cross employees will pay, for the first time, 15 percent of their health insurance costs. Those enrolling in "Personal Choices," however, will take a health assessment test, Battista explained, that will recommend steps to improve their health, like quitting smoking, losing weight, and undergoing cancer screenings. If employees follow the recommendations, Battista said, the 15-percent co-pay will be waived. "Personal Choices" will be also offered to employers next spring, he said, indicating that companies are "lining up" for the new product to avoid large premium increases.

Finally, Battista announced that Frank Montanaro, president of the Rhode Island AFL-CIO, will be the next chairman of Blue Cross’s board of directors. Montanaro will be paid $20,000 per year, plus $750 for every board meeting he attends, according to Scott Fraser, Blue Cross’s assistant vice president of public affairs.