Inside California's HMO Market: A Conversation with Leonard D. Schaeffer

Abstract

Prologue: Over the past decade, as health insurers have reshaped their products around managed care, a growing number of Blue Cross and Blue Shield plans have pursued an entrepreneurial course that stands in contrast to their historical roots and important history. No figure has been more important in charting this course than Leonard Schaeffer, a direct, self-confident man who has held a variety of leadership positions in federal and state governments and in private-sector organizations. In this interview Schaeffer sets forth many of the ideas that have shaped Blue Cross of California in the years he has presided over it. Long before many other Blue Cross and Blue Shield plans (in California they are separate organizations that compete against one another), Schaeffer moved away from traditional indemnity insurance and toward managed care. He came to the attention of Wall Street in 1993 when Blue Cross of California sold 20 percent of its vast managed care business through a public stock offering. In March 1995 Blue Cross and Health Systems International (HSI), another large managed care plan, signed a definitive agreement for WellPoint Health Networks, Blue Cross s for-profit subsidiary, to acquire HSI. However, because the companies were unable to resolve significant differences, they are now engaged in discussions to mutually terminate the deal. Schaeffer has a candid personal style and possesses a quick, self-deprecating wit. Before joining Blue Cross he was chief executive officer of Group Health, Inc., of Minneapolis. He also has served as administrator of the Health Care Financing Administration. Earlier, at various times, Schaeffer was chief operating officer of the Student Loan Marketing Association and a vice-president of Citibank. Schaeffer, a graduate of Princeton University, currently is chairman of the board of the National Institute for Health Care Management.