Anthem Gets Healthy

Health insurance companies continue to face a harsh business environment. HIPAA compliance is approaching—forcing carriers to invest in technology to meet the deadline; medical costs are skyrocketing; consumers are seeking lower insurance rates and margins are razor thin.

To top it off, health insureds are expecting better and more personalized service. While little more can be done to influence the HIPAA deadlines or to reduce how much Pfizer charges for its medication, an insurance company can control its own costs—including administrative and even medical claims—and how it deals with its customers.

Anthem Blue Cross Blue Shield (Indianapolis), the Blue Cross Blue Shield licensee for Indiana, Kentucky, Ohio, Connecticut, New Hampshire, Colorado, Nevada and Maine, is working to reduce costs in a number of ways, including consolidating redundant systems that it acquired during a number of acquisitions and improving the health of its members by leveraging the Internet as a preventive medicine channel.

Growing Pains

Since Anthem has grown primarily through acquisition, it now has a number of redundant policy and claims administration systems that it is looking to consolidate to increase efficiency, says Jane Niederberger, senior vice president and chief information officer, Anthem, Inc. "We have inherited a number of systems," she says. "We are trying to reduce the number of redundant systems that we have. By doing that, we will save on servicing the systems and we will reduce the cost of training."

Collaborative IT Buying

However, with essentially seven different businesses and seven different types of systems, deciding which to keep is a challenge. "Each state has a different member population and each state's system and products are unique," Niederberger says. "It becomes quite a challenge to migrate policy records over to a different application and to different types of products."

Deciding on a single system can be a challenge for any company, but when numerous systems are involved the task is daunting, to say the least. At Anthem, there is an IT Governance Board, consisting of IT leaders, the president and business leaders in each region, which decides on any project that will run over $1 million.

"The big projects go through the Governance Board," Niederberger says, adding thatconsolidating systems easily exceeds the $1 million threshold. "It is done in terms of watching spending and also making sure what we do makes sense. We make sure we are buying technology in the right way and then we make sure we follow up and see the goods are delivered." Niederberger says that the IT Governance Board reviews projects in stages to make sure goals are met. "Following up on projects builds good discipline throughout the entire IT organization. Managers know they have to return value and know in advance people will be looking for it."

So far, Anthem has decided initially to standardize the Midwest operations (Indiana, Kentucky, Ohio) on Facets, a system from TriZetto (Newport Beach, CA, formerly Erisco), to manage claims and payment processing. The Eastern states (Connecticut, New Hampshire, Maine) are currently on ACES (Anthem Consolidated East System), a home-built claims system. "We are talking about bringing Facets across the entire company, but we are still exploring that option," Niederberger says. "We are good at determining ROIs and the cost of a project, but we don't want to incur cost without adding business value. It becomes a challenge every time you migrate to a new system because you are moving millions of member records each time."

Part of the challenge with systems conversion, Niederberger adds, is that each claims system touches dozens of other systems in the company. "Anytime we are thinking about consolidating a claims system, we have business and technology people evaluate what has the best functionality of each system and which is easiest to maintain," she says. "There is a lot of discussion and those people make the hard decisions." Eventually the Governance Board approves a systems conversion.

Buy Before Build

Another part of oversight in the technology area deals with the management of vendors, consultants and technology partners. And closely watching the vendors is an important part of doing business for Anthem's IT shop, mainly because of the company's preference for outside technology solutions. "If we can buy it, we will always buy it before we try to build it," Niederberger says. "If there is a product that has 75 percent of what we need, we'll buy it and modify it to meet all of our specifications.

"We have a whole IT procurement area, including vendor management, that is in place to make sure everything we do is strategic in nature," Niederberger says. For instance, does the company want to bring in consulting expertise for a long or short period of time? "We want to make sure that technology purchasing or spending fits into our long-term strategy. What is the value of the vendor? What is the value of the technology? We try to make spending very hard in technology, and that is a good thing."

For instance, Anthem's mainframe processing is outsourced to Affiliated Computer Systems (ACS, Dallas). "The mainframe environment was too extensive and expensive for us to maintain," Niederberger says. "ACS has a state-of-the-art data center and all of the infrastructure. We set the service goals for ACS and they have always met them. It is a very good relationship."

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

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