At a time when insurers are expanding their presence on state insurance exchanges and rolling out tech-savvy portals to capture new customers, single-state “Blue” insurers are finding themselves hamstrung by regulations and lack of capital.
And unless they’re able to restructure, they’ll find themselves increasingly squeezed out of a changing market, according to a new report by Deloitte.
Single-state Blues “can’t keep up with the current pace of investment,” says Bill Copeland, vice chairman of Deloitte's U.S. Life Sciences division and the study’s lead author.
While public companies have access to currency for mergers and acquisitions to strengthen market share, stand-alone Blue Cross and Blue Shield organizations have limited cash to be able to do so, says Copeland.
That lack of capital is also hampering their ability to invest in infrastructure including new technology platforms that could expand their reach. “With currency, they can buy new capabilities,” says Copeland.
The report, Escaping Rapunzel’s Tower, analyzed 2012 health insurance company data from publicly available financial statements and National Association of Insurance Commissioners’ reports. It found that the “Big Five” insurance companies spent, on average, nearly six times more on capital expenditures than single-state Blue plans.
Unlike publicly-traded companies that answer to shareholders, the non-profit Blues are controlled by state insurance regulators. And while publicly-traded companies can sell stock to raise capital, but Blues don’t have that luxury, he notes.