BENEFIT MANAGERS CARE LITTLE ABOUT NETWORK OWNERSHIP

The ownership structure of an international benefits network has little, if any, influence on benefit managers' selection of a particular network, benefit managers, consultants and others say.

"I wouldn't worry about it," said Sven Grasshoff, vp at Citibank in Long Island City, N.Y. "We have found no difference."

"I wouldn't, by any means, call it a major factor," said Alex Vuitovich, director-international benefits at pharmaceuticals manufacturer Merck & Co. Inc., based in Whitehouse Station, N.J.

"I would say it's far less important" than some other factors, said Carol Kaplan, director-global compensation and benefits at Holland, Mich.-based Donnelly Corp., an automotive parts manufacturer.

Network ownership structures fall into three basic models: those formed by a large insurer; those formed by two large life insurers, such as a U.S. insurer with an overseas partner; and those that are essentially an alliance of independent foreign insurers.

For the first two models in particular, there are no "pure" types, say observers. For instance, the Swiss Life Network largely consists of branch offices of Swiss Life, but it also works with affiliates in some countries. And the AIG/Winterthur Alliance includes affiliated companies as well as American International Group Inc. and Winterthur subsidiaries.

At least theoretically, if not necessarily in practice, there can be advantages and disadvantages for networks largely owned by one or two large insurers and those consisting of affiliated insurers.

For instance, networks that are largely operated by subsidiaries of large insurers could possibly offer more stability and greater efficiency and have more control over their local operations. On the other hand, networks that use affiliated insurers may be freer to use the strongest insurer in that particular country, rather than a particular branch office that may not necessarily be a major presence with clout in that country.

But in practice, this is rarely an issue, at least today, say benefit managers and others. Years ago, it was assumed there was a "vast difference" between an owned network and an affiliated network, "but I think today most of the networks operate on a very similar basis, and the difference between an owned network and an affiliated network is next to negligible," said Robert Pickrell, former president of the Insurope network and now an independent consultant. "It's seamless," he said.

Years ago, benefit managers "would think more of the global network, but now they're focusing right down to the country level," said Greg Arms, senior vp at AIG Life Cos. and director-group management division, who works with the AIG/Winterthur Alliance and is based in New York.

Benefit managers are concerned about such issues as the quality of service, whether local operations have the needed products, whether they are a large enough presence in the market, and whether there are cost-containment features within the health care programs. "These are all local questions, not global questions," said Mr. Arms.

The change to a local focus reflects benefit managers' greater sophistication, said Mr. Arms. "They recognize there's some pretty big dollars that are affected locally no matter how large the pool dividend," he said. They also understand that the local cost controls in place may be more important than potential dividends, he said.

Henry Casares, director at Insurope, said, "I don't know if it's become so much of an issue with the benefit manager because what they're looking for, really, is the quality of the network and the quality of the local company."

"I would never say to a client that the ownership structure of a network is a pro or a con," said Liz Partyka, a consultant with Hewitt Associates L.L.C. in Lincolnshire, Ill.

For instance, said Ms. Partyka, it could be argued that reporting should go more smoothly among the subsidiaries of large insurers than it would between affiliated insurers that have multiple reporting facilities.

"But it's not a black-and-white issue, because if an affiliated network has done its homework and has good, strong ties with their affiliates, they're going to insist that these affiliates report the way they need to report, and in the time that they need it," said Ms. Partyka.

Some of the affiliated networks "have excellent cooperation built

up. . .where it's actually more responsive and stronger than a wholly owned alliance," said Citibank's Mr. Grasshoff.

"My guess is, unless a client has had bad experience" with a problem related to a network's ownership, "most clients are still going to be more driven by the costs and the reputation for service that the network has," said Barry Blecher, principal with PricewaterhouseCoopers L.L.P. in Secaucus, N.J.