The Blues system and PHIXs: not standardizing on a single utility

BCBSMN has licensed the platform for its private health insurance exchange (PHIX) and defined contribution product from eHealth (original announcement April 30). For eHealth, which has seen its government systems revenue fall off by $2M year-over-year in the most recent quarter (per Q1 2012 analyst call), the deal will be a welcome addition to its non-commission revenue stream. It also represents a significant in-road into the Blues system (the previous deal with Blues I could uncover was in mid-2010 for licensing the technology behind Premera’s online Medsupp sales).

It appears that Bloom was not “anointed” the official Blues private exchange by its acquisition by Wellpoint, HCSC and BCBSM (I certainly had the view that Bloom’s new owners were looking to create a share utility with the acquisition). In fact, Bloom does not seem to have won much business from other Blues plans at all as yet: BCBS Kansas City announced a private exchange in November 2011 under the “Blue KC Exchange” brand and appears to have used a company called Online Insurance Corporation to build out the platform. About the same time, Highmark announced a deal with Array Health to use its technology to create an exchange targeting small business customers. Of course, both of those deals were likely well in the works before the Bloom Health acquisition was announced (therefore pre-dating the inherent “blessing” by the Wellpoint, HCSC and BCBSM). The BCBSMN announcement, however, is more meaningful given the decision must have post-dated the Bloom acquisition by many months.

What could be going on? Four broad scenarios:

  1. Bloom doesn’t license technology: Minnesota, Kansas City and Highmark were all technology deals. Bloom Health may not find such licensing deals attractive or easy (e.g., given the role of Bloom’s vendors such as Connectyourcare, an ESRX subsidiary).
  2. Bloom is focusing on the “big picture” (at the behest of its owners): Bloom’s capacity may well be taken up with building out PHIX operations for its new owners (which together have 19 BCBS licenses) and/or may be working on a national scale offering (consumer oriented or national account oriented). In this scenario, Bloom and its owners want to avoid being distracted and are happy to see other Blues plans pursue unique local solutions (especially for small group).
  3. Smaller scale Blues plans may not be interested in tying up with Bloom: may be a function of concern about where their priorities will land vs. those of Bloom’s new owners (see #2 above), some lingering anxiety about the role of big plans vs. smaller plans or continuing the old Blues tradition of having multiple answers to common needs (pharmacy, national accounts, etc).
  4. Bloom’s capabilities don’t show well in an RFP process. Bloom did try to go after the BCBSMN business but eHealth just had a better value proposition.

Impossible to say now, outside-in which scenario is the correct one. However, we should get more clues in the coming months as other Blues start to announce their PHIX strategies and we see what role Bloom plays in any of them.

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