FORMER OHIO BLUES PLAN FACES EAGER COMPETITIONPosted On: Apr. 20, 1997 12:00 AM CST
CLEVELAND-As the old cross and shield were dismantled from its home base in Cleveland and rivals nipped at its heels, Medical Mutual of Ohio moved swiftly last week to minimize any potential disruption of service to its customers.
Management for the former Blue Cross & Blue Shield of Ohio knows it must act fast to allay customer concerns about continuity of service, because its competitors are eager to steal away business and to beat it out for new business.
Medical Mutual "is being given the benefit of the doubt among existing customers, but new clients have been shying away from the former Blue Cross because of the uncertainties," said Len Gray, managing director for the Cleveland office of benefits consultant William M. Mercer Inc.
Medical Mutual's rivals have been emboldened by months of turmoil surrounding the former Blue Cross plan after its unsuccessful attempt to be acquired by Columbia/HCA Healthcare Corp. In the course of that ill-fated effort, the national Blue Cross association revoked the company's right to use the shield and cross trademarks.
When it was part of the Blue Cross system, the company could tout the convenience of a national insurance network that assured customers their medical coverage would be recognized and accepted nearly anywhere they traveled. Now it's trying to patch together its own network by creating alliances with other insurers.
For example, Medical Mutual last week sent letters to all BC/BS plans nationwide to assess their willingness to continue serving Medical Mutual enrollees outside Ohio, said Kent W. Clapp, president, chief operating officer and chairman of Medical Mutual.
Likewise, the company is negotiating with two preferred provider organizations that contract with physicians and hospitals nationwide. If agreements are struck with Affordable Health Insurance of Chicago and MultiPlan of New York, the PPOs would act as subcontractors who would serve Medical Mutual customers in other states, Mr. Clapp said.
Mr. Clapp said one Blues plan already has responded favorably to Medical Mutual's solicitation for assistance, but he declined to identify the insurer.
Iris Shaffer, a spokeswoman for the national Blues Cross & Blue Shield Assn. in Chicago, said arrangements developed between Medical Mutual and other Blues plans would not be in violation of the association's policies. However, Ms. Shaffer said such a piecemeal approach is "time-consuming, expensive and doesn't necessarily provide the same network management."
Medical Mutual's competitors are counting on as much.
Anthem Blue Cross & Blue Shield, which is now the only Blue Cross plan authorized to do business in Ohio, is about to roll out a "fairly substantial" advertising campaign to tout its new status, according to an Anthem spokesman. Linda Somers, Anthem's executive director in Northeast Ohio, said the company also is discussing ways it can beef up its presence in the market.
Likewise, Prudential Health Plan is expanding its provider network sooner than it anticipated to present an alternative to consumers, said Greg Donnelly, the plan's director of sales. In Northeast Ohio, Prudential by July 1 will add 400 primary care doctors, 1,000 specialists and 10 hospitals to its network, Mr. Donnelly said.
While Medical Mutual retains Northeast Ohio's largest panel of health care providers and boasts the largest number of enrollees in the market, its ability to counter the offensives about to be waged by competitors may be limited.
Medical Mutual plans to spend no more than $2 million to $3 million in advertising in 1997, a sharp contrast with the $10 million the company estimates it spent in 1996. The anemic 1997 advertising budget includes $500,000 for a newspaper, radio and television campaign to promote the new brand and its 12-point star logo, Mr. Clapp said.
Limiting the advertising budget while changing the brand name and logo is perilous, said Deepak Sirdeshmukh, assistant professor of marketing at the Weatherhead School of Management at Case Western Reserve University.
"Medical Mutual means nothing to people," Mr. Sirdeshmukh said. By changing the name, he said, the company is "losing a lot of equity immediately." "They'll be hard-pressed to attract new customers," he said.
Medical Mutual spokesman Dave Buckel put the situation in perspective.
"In the overall scheme of things, we need to restore the company as quickly as possible," Mr. Buckel said. "That dictates economy."