Employers Offer More Managed Care Plans in Strong Economy

Responding to a "tight labor market," companies are "sprucing up medical coverage," offering "enhanced benefits" that include "more flexible" and "less restrictive" health plans, Investor's Business Daily reports. IBD focuses on Trigon Healthcare Inc., the "largest health care company in Virginia," which has adapted its business strategy and product offerings to meet the new demand for enhanced health options. With a range of deductibles, premiums and provider options, Trigon -- the former Blue Cross and Blue Shield of Virginia -- offers varied coverage to individuals as well as to large and small regional groups. To remain competitive and to command a large market share, Trigon has "gone for stability" in pricing its plans. While major competitors have increased premium costs 15% to 20% over the past three years, Trigon has raised prices only 7% to 8% annually. It has 35% of the state's fully insured premiums, more than two million members. Last month, Trigon started offering KeyCare 25, a "lower-premium" PPO with a $25 copayment, and in January, the company will introduce a "low-premium HMO" with a $25 dollar copayment. Analyst Clifford Hewitt, of Legg Mason Wood Walker Inc, said, "Because of [Trigon's] strong market share, it's been able to negotiate more fair pricing with providers, and it's not had to lower prices to buy share." He added, "At the same time, it's kept its other costs in line, and has earned a good return on investment income." This policy has enabled the company to build its membership; commercial enrollment grew 12% in 1999, and in the first half of this year, enrollment rose an additional 15% to 1.04 million. Analyst Eric Veiel of A.G. Edwards & Sons Inc. said he expects the company's products and strategy to help it obtain a 50% market share "in the next four to five years," as other insurers drop out of the industry. He acknowledged that the firm's growth will depend on the economy: "The question is, will the economy slow in 2002? If it does, employers are less likely to offer open access products. If that happens, the health plans with the best ability to control expenses (will fare best), which puts Trigon in a good position" (Much, Investor's Business Daily, 11/9).