For decades Blue Cross and Blue Shield of Maryland has won deep allegiance from unions, corporations and state and local governments, who used the company to provide medical insurance for legions of workers.
But today, that loyalty -- dating to the company's founding in 1920 -- is being severely tested as those huge groups learn they have the muscle to force insurance companies to sharply lower prices.
Just last week, for instance, about two dozen health insurers submitted a bid to strip the Blues of the right to provide coverage to nearly 200,000 current and retired state workers and their families. It is the most sought-after contract in years because it represents the single largest block of patients in Maryland after Medicaid recipients, and it is the second-biggest chunk of business the Blues have.
But it is just one of several large blocks of business out there that are expected to be dangled before the eyes of insurers by big companies and organizations determined to win dramatic price reductions after years of out-of-control premium increases.
Some of the business is old. The Blues, for instance, have held the state contract for 26 years. And some are new, such as Medicaid and Medicare, which have become fresh terrain for managed care companies that have set up health maintenance organizations catering to the over-65 population.
"Competition is more fierce now, because the stakes are higher," said Geoffrey L. Adams, managing consultant on health care in the Baltimore office of William M. Mercer Inc.
"You are talking about companies fighting for their very existence. And you're talking about one thing and one thing only, market share," Mr. Adams said. If companies win market share, he said, "they think profit will follow."
He foresees a huge shakeout in the health insurance industry, with the top 1,000 companies nationwide reduced to perhaps only a handful. In the interim there are alliances like those between Travelers Inc. and Metropolitan Life Insurance Co. and between health providers themselves and insurance companies.
In this new environment, price is playing a larger role than ever before as businesses of all sizes aggressively look for opportunities.
"Ten years ago, price didn't play as large a role," said Rita Costello, vice president of marketing and new product development for Blue Cross. "Companies are looking at many and different ways to meet their need for coverage for a fair price, so you see a lot . . . of experimenting in the health care arena," she said.
Already it has led to market shifts. Blue Cross has been trying to plug leaks in its market share since January. The insurer's revenues dropped 10 percent in the first quarter over the same period last year, and the trend continued in the second quarter.
The Blues aren't the only ones scrambling. Mid Atlantic Medical Services Inc., HealthPlus Inc., CIGNA HealthCare, Prudential HealthCare Plan and other big players all are trying to redraw the lines of the marketplace in their favor.
These companies may be competing not only against each other but also against new hospital-run alliances -- hospitals, doctors and others who band together to provide care for a set fee.
"The major players -- insurance companies and HMOs -- don't own the physical assets of the system, so they have to make alliances," said Alvin D. Ankrum, president of the Maryland Healthcare Consumer Alliance Inc., a group of 26 corporations and labor groups.
Second group is organized
Mr. Ankrum is organizing a second group of nearly as many Maryland workers as the state employee group -- about 70,000 employees, plus families -- to extract price cuts from providers, possibly by using the same benefit package and bidding together.
The group wants prices 15 percent to 25 percent below current market rates, which could come in a long-term agreement with insurers and providers. That is "our first shot out of the box," Mr. Ankrum said.
"I think you will see a lot of things happening in the next six months," he said. His group is hoping that by placing its business with one alliance of hospital providers, it can help force the closing of other unneeded hospitals. The group estimates empty beds in Maryland hospitals cost $1 billion.
The small-business market is a template for what is expected to happen in other segments of the Maryland markets.
Under a state mandated reform, companies first began selling a new standard benefits package to employers of between two and 50 workers on July 1, and at least five insurers have slashed their prices in response to competition.
With one of the lowest-priced small-group products, Prudential took business from Rockville-based MAMSI, leading MAMSI to drop its rates. Because of stiff competition, Blue Cross cut prices up to 30 percent within the first two weeks after the state mandate took effect.
Insurers are being tested not only on price, but also on the quality of service they offer.