In Sickness and in Health

Confronted with substantial market losses and uneven public policy — and having identified more than $125 million in savings to date — Blue Cross Blue Shield of Michigan isn’t sitting idly by awaiting Lansing’s prescription for health-care reform.


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In Sickness and in Health
Daniel Loepp, president and CEO, Blue Cross Blue Shield of Michigan
Photograph by Scott Stewart

Dan Loepp has gone off script, and the crowd loves it. The president and CEO of the state’s largest health insurer, Blue Cross Blue Shield of Michigan, is delivering a thank-you speech to about 300 employees who have hit major goals halfway into a four-year company-improvement project called “Performance Transformation.”

“Our culture today is about embracing these ideas,” Loepp shouts from center stage, in front of a massive projection screen. “And if you don’t embrace them, it’s hard to hide here anymore.”

The ideas include consistent improvement and personal accountability. It’s the kind of meeting that would draw yawns and BlackBerry checks from employees at plenty of companies, but all 300 participants are watching Loepp, engrossed with the numbers he’s calling off. They applaud with each announcement of money saved or efficiency gained. The group suddenly turns serious, however, when Loepp shifts to the economic challenges confronting the insurer’s future growth.

“We’re battling back from the worst-case scenario,” he says of the deep economic trench the nation is wedged into — nowhere more firmly than in Michigan. “If [I] would’ve read this scenario two years ago, I would’ve deemed it fiction.”

The list of outside challenges confronting the Blues has grown as Michigan’s economy has continued to hover near the bottom. For one, the Blues is designated as the “insurer of last resort,” which means it must cover everyone, including those with pre-existing medical conditions.
Along with ballooning losses from its individual market — more than $133 million last year alone — large and well-capitalized national insurers have made inroads into the Blues’ territory. Their preferred path: buying smaller competitors to get a foot in the door.

For example, in 2005, Hartford-based Aetna Inc. bought the parent company of Southfield-based PPOM. In that same year, Detroit’s Health Alliance Plan formed a national affiliation with Cigna Health-care of Philadelphia.

Meanwhile, closer to home, controversial Blues-backed bills to change regulations around the individual market stalled in the state legislature last year amid heated debate, and then got shoved aside in recent months when the state’s gaping budget deficit demanded full attention.

Blue Cross contends other insurers “cherry-pick” healthy customers, leaving them to assist everyone else. The result is an unfair cost advantage.
What’s more, the company’s efforts this year to raise rates in its individual and Medigap markets spurred a fight with state Attorney General Michael Cox that has, at times, turned ugly. And its $2.2 billion in reserves have drawn heated statements from state legislators, who say that at least some of that money should be used to lower the cost of health-care coverage.

Performance Transformation, which in two years saved the Blues $125.4 million by reviewing everything from how the insurer buys and sells goods to the accuracy of claims processing, is a key piece to remaining competitive in the face of these challenges, Loepp says. The insurer projects the savings could top $150 million by January.

But more than this, he says, the Blues has to move the needle on health-care quality and outcomes; ensure they’re delivering the best service, bar none; continue to diversify their products well beyond the gold-plated PPO plans of years past; and push change in Lansing that updates what the Blues sees as anachronistic insurance regulations that put the burden of insuring the sick and older masses squarely on their shoulders.

It’s a daunting to-do list, and the employees in the room have been working long weeks and late nights to reach the more than $125 million in savings that Loepp is highlighting. Instead of offering tired and polite applause, however, the crowd is fired up. They’re convinced — as Loepp is — that they’re on the right side of the debate and have to get this right. A crack about “certain newspapers” that have been critical of the Blues gets loud applause; while another observation about Loepp’s former job working in the state attorney general’s office gets widespread laughs.

The 300 people in the packed room are a small sampling of the more than 7,000 Blues employees who work statewide. In this setting, Loepp is like a rock star, and the mood is clear: Challenges? Bring ’em on. It’s a new era at the Blues.

The Outsider

Sitting in the head office of a more than $20-billion organization is a long way from the Detroit neighborhood where Loepp grew up. But he’s had spent plenty of time since then to mingle in the rarefied circles of Michigan’s power brokers.
“I never dreamed ... that I would get a job like this,” Loepp says. “I was just a kid from the east side who went up the ladder with various things I did.”

Loepp, 52, earned a bachelor’s degree in communication, followed by a political communication degree in 1986, from Wayne State University in Detroit.

By the time he came to the Blues in 2000 as vice president of governmental affairs, he was known as a savvy political operator, well-steeped in the workings of Michigan and national government. He’d served as chief of staff for state Speaker of the House Curtis Hertel, as director of communications for state Attorney General Frank Kelley, and on the staff of U.S. Rep. Dennis Hertel.

Loepp now sits on the national Blues association’s holding corporation board, and on its health policy and legislative committee, among others.
Because he wasn’t immersed in the sometimes-arcane practices of the health-care industry, Loepp’s “outsider” status has served him well in nearly a decade at the Blues. His successful leadership of the two-year lobbying campaign helped push through small-group market reform. He also fought back efforts to transition the Blues, a nonprofit with special tax-exempt status, into a for-profit operation.

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