Anthem vs. Aetna BA 490

Winter Quarter, 2015

SUMMARY

Key Issue

One major key factor for both Anthem and Aetna is that they are both well-known insurance

companies. Most employers offer either of these health care insurance plans. When it comes to

products and services each company offers different coverage plans. Aetna is positioned higher

in regards to offering more services that go beyond health care insurance. Both of the company’s

main focus and profits come from their health insurance plans. When it comes to reviving health

insurance individuals can either sign up for their own plan or it is offered through their job.

Recommendations – Business Model

Anthem’s value proposition focus on quality insurance which gives them an advantage in selling

health insurance. Aetna needs to expand its value proposition to focus on selling better coverage

and quality insurance. They lack short-term plans which limits selection for people who want to

purchase health insurance. Both companies dominate in health care industry but Aetna needs to

focus on better health care quality.

Recommendations – Managerial Execution

Anthems culture is better preparing physicians to treat common infectious and parasitic diseases

that originate from outside the U.S. and to assist them in distinguishing medical conditions

commonly seen in the United States from those of foreign origin. Their organization identifies

with over one million of their members are estimated to identify as lesbian, gay, bisexual, or

transgender. They have established a program that reviews the business, medical (quality and

safety) and legal basis for the language access mandate in health care. Aetna should recognize

their employee’s and establish helpful programs.

Recommendations – Corporate Responsibility Measures

One major corporate responsibility that Anthem proceeds to do is the give back to the

community. The Anthem Foundation partners with thousands of national and local nonprofit

organizations that share our goals and our commitment to creating a healthier generation of

American’s. It helps define them as an organization that is committed to transforming health care

through trusted and caring solutions. Aetna should participate in helping local communities by

giving back.

Recommendations – Driving Forces

A driving force that Anthem proceeds to do is keep cost of health insurance low. They help

formulate an effective plan, design changes and make cost-containment initiatives. Anthem

strives to reduce companies health insurance plans low for employees. Aetna needs to focus

more on quality and less on offering so many different plans.

Recommendations – Porter’s 5 Forces

Aetna and Blue Cross Blue Shield are strong competitors in many different health insurance

markets. In the United States Anthem is the largest health care company and provides insurance in all 50

states. The company offers coverage for large companies, small businesses, and individuals. More

physicians and hospitals contract with Anthem than any other insurance provider in the world. Anthem

offers seven types of coverage in the U.S. They are Flexible Spending Account, Health Maintenance

Organization, Health Savings Account, Health Reimbursement Arrangement, Indemnity and Traditional

Coverage, Point-of-Service, and Preferred Provider Organization. Another recommendation for Aetna is

to focus more on customer service support and be available in several states.

Recommendations – Generic Competitive Strategy

Anthem is the nation's oldest and largest family of health benefits companies and undeniably the

most recognized brands in the health insurance industry. They provide health benefits for more

union workers, retirees, and their families than any other national carrier. Collectively bargained

contracts account for approximately 20 million Blue company members - more than one-fifth of

the Blue System's national enrollment. Working with labor is still an important priority. Aetna

needs to offer better cover plans to employees in other companies.

Recommendations – Market Sizing

Anthem BlueCross BlueShield makes it easy to add dental, vision and other types of insurance.

This insurance is affordable to most individuals and companies. It is one of the leading health

insurance providers in the world. Over 70 years old and made up of 39 companies within itself,

Anthem provides health insurance to over 100 million people. In the United States it is the

largest health care company and provides insurance in all 50 states. Aetna should not offer

several different plans. Instead they should only focus on a few and build a strong customer base.

Recommendations – Market Positioning Maps

Although Anthem may have a better health care coverage for individuals, Aetna does provide

more services. Aetna Health Insurance Company is one of the most recognizable names in the

industry. The organization is considered a leader as it offers dental, disability and prescription

coverage in addition to its general health insurance, and touts a membership of over 19 million

members in its medical plans alone. In order for Anthem to overcome Aetna they need to offer a

few more products and services. Anthem needs to offer more products and services in order to

gain a better advantage in the market.

Recommendations – RBV Analysis

Anthem offers coverage for large companies, small businesses, and individuals. More physicians

and hospitals contract with them than any other insurance provider in the world. With one out of

every three insured Americans getting their coverage from Anthem. It is represented in the U.S.

as well as 170 countries worldwide making it the ideal insurance for travelers. Aetna needs to

become more available and reliable to businesses.

Recommendations – Value Chain Benchmarking

While Anthem is able to be successful right now with quality affordable coverage, it would do

well to expand its advertising partnerships beyond company partners to all forms of partnership

which allow them to reach both consumers and advertisers. Many people do not hear about

health insurance unless it’s through their work or friends. Aetna needs to focus on better quality

health insurance plans and not let their plans become limited.

Recommendations – Leveraging International Competitiveness

The company is progressing a more regionalized approach to sales and marketing and is trying to

establish stronger ties in the local community. Anthem also wants to increase its brand name

recognition through advertising and by playing a greater role in community events. Anthem is

groundbreaking initiative to advance primary care and improve the accessibility and affordability

of quality health care through a partnership with the centers. Aetna should become more

connected with their surrounding communities.

Recommendations – SWOT Analysis

Anthem is enhancing their financial leverage position to strengthen its ability to borrow and

repay money, which in turn enhances its business operations. The company faces a limited scale

of operations compared to competitors may be a concern for the company. They need to not limit

their services to the United States only. Anthem has developed several new jobs which have led

to a decrease in unemployment in the U.S. The company’s businesses are regulated by various

governmental and regulatory authorities. Changes in government policy, legislation or regulatory

interpretation may adversely affect the company’s product range. Anthem does not need to

change their products or services. Aetna delivered weak financial performance in 2011 which

they need to turn around and gain more profit.

Recommendations – Financial Analysis

When it comes to the finances Aetna has a higher probability rate only because they offer more

services. Anthem needs to offer a better selection in their health care plans. Anthem has been

working towards enhancing healthcare through the provision of reliable and superior quality

service which will help increase their financial status. Medical enrollment continues to increase

with a year over year increase of nearly 2 million members

Business Model

Anthem Aetna

Value

Proposition

They provide a low-cost coverage for high-cost hospital care. Access to

good quality health care for a reasonable price.

They strive to deliver the highest quality and value possible through simple,

easy and relevant solutions.

Profit

Model

Revenue: A couple dozen to

several hundred dollars collected monthly in

premiums from each covered individual.

Variable Cost: Advertising, hospitals,

and doctors. Deductibles, co-insurance, and co-pays.

Payment for health care for each covered

individual. Fixed Cost: capital

expenditures, employee salaries and benefits,

building maintenance, and utilities. Information systems maintenance,

coordination with hospitals to manage

costs, actuarial staff, administrative staff & facilities, reinsurance.

Revenue: The price that customers pay in order

to have health care insurance with this

company. Variable Cost: Provider

payments, network design, connectivity

solutions for members and providers. Evidence based plan and

incentives. Doctor visits and hospital stays.

Fixed Cost: capital expenditures, employee

salaries and benefits, building maintenance, and utilities

Resources

Needed

Access to a large amount

of cheap capital for payment of health care

costs, top-quality information systems, good relationships with

doctors/hospitals, talented actuarial staff,

dependable reinsurance.

Access to a large amount

of cheap capital for payment of health care

costs, top-quality information systems, good relationships with

doctors/hospitals, talented actuarial staff,

dependable reinsurance.

Execution

Anthem Aetna

Organization

(recruiting/

retaining/ empowering

staff)

They manage customer service

phone lines, answer questions and

complaints and process medical claims. "Turnover is

costly," said Randy Brown, senior vice

president of human resources. "It costs us, at a minimum, $3,000

to recruit a person. When you reduce

turnover, you reduce recruiting and training costs.1

Where Aetna will cut A breakdown of Aetna's

upcoming 4,400 layoffs, which are part of 6,000

job cuts companywide. 2,700 in customer service: includes claims handlers

and member services representatives 1,120 in

regional operations: includes sales and marketing, patient

management, network management,

underwriting, other support functions 580 in other areas: information

technology, human resources, national

medical services, finance, other staff functions.2

Resources

(New resource

investments)

Blues plans have been merging and shedding

their not-for-profit status to become

stronger contenders. The offering was the final step in Anthem's

conversion from a mutual insurance

company owned by policyholders to a public company

owned by investors. Anthem new status as

a stock company will give it greater access to capital and hence

greater financial firepower to buy more

Blues plans.3

Aetna is eliminating 4,000 positions and is

discontinuing the sale of 2 underperforming financial

products, both in an effort to improve profitability. The after-tax charge

associated with these actions is $1.025 billion.

Aetna will discontinue the sale of guaranteed investment contracts and

single-premium annuities to certain classes of large

case retirement plan sponsors. The company also announced that it

added $574 million to workers compensation

reserves and that it began

1http://search.proquest.com.falcon.lib.csub.edu/docview/1027125725/9B6113E1D7654CFEPQ/1?accountid=10345 2 http://search.proquest.com.falcon.lib.csub.edu/docview/256486088/D595F52558184453PQ/2?accountid=10345 3 Benko, L. B. (2001). Two views of anthem's IPO. Modern Healthcare, 31(45), 16 -17. Retrieved from

http://search.proquest.com/docview/211949797?accountid=10345

discounting those reserves consistent with industry practice. The net effect of

the actions will be an after-tax charge to net

income of $9 million.4

Policies &

Procedures

(Contracts)

Anthem's Care Comparison tool

enables members to access the typical costs associated with

all aspects of a specific medical

procedure. From lab tests to recovery room charges. Members can

compare the differences in cost

among hospitals. In addition, Anthem members can get

information on how frequently facilities perform each

procedure, which can assist the member in

assessing the care they seek. 5

Aetna members can access Aetna's

transparency resources by logging on to Aetna’s website. Aetna's

password- protected member website,

searching for their physician using "DocFind," and choosing

"Provider Detail." Members who view rates

will see the actual rates specific to their health plan for office visits,

diagnostic tests, minor procedures, major procedures and other

services. Rates are provided for up to 30 of

the most widely accessed services by specialty.6

Continuous

Improvement

Anthem was

recognized for Innovation in e-Health at the 2002 Best of

Blue National Awards Program in Medical

and Pharmacy Management today in Chicago. Anthem

received an award for its HEDIS(R) Medical

Record Review System, a system designed to same time

and money and

America's Health

Insurance Plans (AHIP) recognized Aetna (AET) with the 2006

Large/Affiliated Innovation and Excellence

Award: Chronic Care for the company's integrated approach to helping

members with diabetes manage their condition.

The award was given to Aetna at the AHIP Foundation's Innovation

and Excellence Awards

4 Dauer, C. (1994). Aetna takes $1B charge for restructuring effort. National Underwriter, 98(6), 2. Retrieved from http://search.proquest.com/docview/228447179?accountid=10345 5 http://search.proquest.com.falcon.lib.csub.edu/docview/453819399/6E981F85AFDD4E29PQ/2?accountid=10345+ +*96 6 http://search.proquest.com.falcon.lib.csub.edu/docview/444729455/698298F3C0A14197PQ/2?accountid=10345

improve accuracy when collecting records data from

physician offices.7

Dinner at the 2006 National Policy Forum in Washington, D.C.8

Systems Information technology is expected

to play a critical role in the merger of

Anthem Inc. Reports indicate Anthem expects to invest more

than $100 million in the development of

information systems as a result of the merger.9

HealthOne and Aetna are committed to the use of

information technology to alert physicians to the

need for an intervention. HealthOne already has one of the more robust

information systems among physician groups

across the country. By integrating medical claims data with pharmaceutical

claims, physician reports, lab tests, and patient

demographics, Aetna can assist in highlighting gaps in care, potentially

dangerous drug interactions, and members' lack of adherence to

prescribed treatment plans.10

Rewards &

Incentives

In response to

customers' needs, Anthem is introducing

a new product designed to increase engagement in health

and wellness activities, resulting in

healthier and more productive employees. Known as Anthem

Health Rewards, the product enables

Anthem customers to

Aetna was honored for its

Healthy Lifestyles program, which offers

incentives and rewards employees for making positive choices for better

health. Employees can earn financial rewards,

which can be deposited in a health savings account, employer-established fund

or paycheck in order to help employees manage

their health care expenses.

7 Anthem blue cross and blue shield named 'best of blue' for innovation in e-health. (2002, Oct 08). PR Newswire Retrieved from http://search.proquest.com/docview/448934845?accountid=10345 8 http://search.proquest.com.falcon.lib.csub.edu/docview/215493409/97B5228A3EAF4ED6PQ/1?accountid=10345 9 Way, P. (1996). Anthem identifies technology angle to merger with NJ blue. Insurance & Technology, 21(7), 8. Retrieved from http://search.proquest.com/docview/229286724?accountid=10345 10 HealthOne care system physician groups join aetna's network; entire HealthOne care system including harvard vanguard medical associates and dedham medical associates now contracted with a national health insurer. (2006,

Sep 22). Business Wire Retrieved from http://search.proquest.com/docview/445163728?accountid=10345

provide their employees with a variety of rewards -

for example, gift cards, premium

contribution discounts and account deposits - when they complete a

health risk assessment and/or participate in

health and wellness programs offered by Anthem.11

The program also offers other incentives to make physical fitness a priority,

such as free pedometers.12

Culture Anthem provides on-site fitness centers or health club

reimbursements, subsidized healthy

food options at its on-site cafeterias, friendly fitness competitions

among its associates, weight management programs and

incentives toward the cost of health care

coverage for demonstrating healthy behaviors –promoting

an overall healthy lifestyle.

The Fit-Friendly Worksites program is a catalyst for positive

change in the American workforce

by helping worksites make their employees’ health and wellness a

priority.13

Aetna Inc, talked about goals achieved thus far, and the challenge of

combining her head of comms role with the

company's drive to develop a high-performance culture. She

said that she has three areas of responsibility: developing the strategy

for all corporate communication, managing

enterprisewide internal communication and overseeing the company's

Council for Organizational

Effectiveness (COE). The COE is a body of 14 executives who look at

specific aspects of culture in order to sustain high

performance. The all-employee survey came out of one of these teams and

that is now part of the culture. Everyone knows

about the "Aetna Way,"

11 Anthem blue cross and blue shield introduces anthem health rewards: Market-leading incentive-based products.

(2010, Oct 27). PR Newswire Retrieved from http://search.proquest.com/docview/760094174?accountid=10345 12 Awards; aetna is named a best employer for healthy l ifestyles for a second year. (2006). Physician Law Weekly, , 93. Retrieved from http://search.proquest.com/docview/230788442?accountid=10345 13 http://www.businesswire.com/news/home/20140611005685/en/WellPoint-Recognized-American-Heart-

Association-Fit-Friendly-Worksite#.VPOhuvnF9po

the company's approach to the definition and description of their

culture.14

Leadership

(How do senior

managers/ executives

inspire staff or solve specific operational

problems)

For healthcare executives, leadership

is a habit -- something they do each and every

day, truly a part of their very being. Leadership is often so

intrinsic that it can be easily shielded from

examination and transformation. However, in these

complex times in the healthcare

management field, leadership is something that must

be scrutinized as much as cost reductions. The current health reform

environment calls for a whole new spirit of

service, Joseph R. Swedish. 15

Mr. Bertolini's position at Aetna includes oversight

and responsibility for all businesses and service

operations across Aetna's broad range of health care products. Mr. Bertolini

has encouraged Aetna's support for LGBT-related

organizations and events, and the development of policy positions, products

and programs that serve the needs of the LGBT

community as a part of Aetna's senior leadership team since 2003.16

14 Sharon, W. K. (2006). BALANCING COMMS AND CULTURE AT AETNA. Strategic Communication Management, 10(4), 4. Retrieved from http://search.proquest.com/docview/203589460?accountid=10345 15 Paulson, M. J. (2013). A new spirit of service. Healthcare Executive, 28(6), 76-77,79. Retrieved from http://search.proquest.com/docview/1458792108?accountid=10345 16 Aetna; out & healthy, national LGBT health conference to give aetna president mark bertolini healthcare leadership award. (2007). Managed Care Business Week, , 11. Retrieved from

http://search.proquest.com/docview/216551190?accountid=10345

Corporate Responsibility Measures

Anthem Aetna

Ethical

Behavior

(Lawsuits

brought against the

company)

An applicant for Anthem Blue Cross insurance has sued the

giant insurer over allegations that it

failed to protect his confidential information from

computer hackers who gained access to the

company's internal records earlier this year.

The lawsuit stems from a security breach

involving attorneys who were suing Anthem and gained

access to private information of people

who had applied for insurance. Magorien says in his

lawsuit that his Social Security number,

address and credit card numbers were released, potentially

exposing him to identity theft.

Magorien had also provided personal medical information to

Anthem when he applied for insurance

in June 2009.17

The three lawsuits, proposed as class actions, were filed about two

weeks ago -- just days before Aetna's board

rejected an acquisition overture by ING Group and WellPoint Health

Networks and decided to split Aetna into two

publicly owned companies.18

Corporate

Citizenship

(charitable

giving)

The Anthem Blue Cross and Blue Shield Foundation is a private

corporate Foundation

Aetna will donate $10,000 directly to the charity chosen by the small

business selected as

17 Helfand, D. (2010, Sep 18). Anthem is sued over data breach; the suit seeks class action status for consumers

whose records were exposed. Los Angeles Times Retrieved from http://search.proquest.com/docview/751386504?accountid=10345 18 http://search.proquest.com.falcon.lib.csub.edu/docview/256433285/D96AA42F5C334BBCPQ/1?accountid=10345

dedicated to promoting the health and well-being of the

communities where Anthem, Inc. works

and lives through targeted charitable giving. Established in

2000, the Foundation awards grants to

programs and initiatives that: help people in Anthem

communities manage and improve their

health; enrich the greater community; or are supported by

Anthem associates.19

Aetna's Southeast Region Small Business of the Year. The Southeast

Region includes Georgia, Florida, North Carolina,

South Carolina, Tennessee, Alabama, Mississippi, Louisiana and

Arkansas.20

Sustainability

(Impact of the

company on the natural environment

or on the general

physical/ financial/ mental health

of society)

Anthem is working to reduce costs by

consolidating redundant and improving the health

of its members by leveraging the internet

as a preventive medicine channel. They now have a

number of redundant policy and claims

administration systems that it is looking to consolidate to increase

efficiency.21

Aetna is committed to making it easier for health

care professionals to do business with us. They are focused on creating a

healthy environment. Our paperless contracting is

one way we are advancing this mission. Aetna is paving the way for other

companies to make technology decisions that

save time and money and reverse the negative effects of business on the

environment. 22

19 Anthem foundation awards more than $2 mill ion so far this year. (2004, Aug 23). PR Newswire Retrieved from http://search.proquest.com/docview/451660435?accountid=10345 20 http://search.proquest.com.falcon.lib.csub.edu/docview/445613800/4C9CF2356B814830PQ/1?accountid=10345 21 MacSweeney, G. (2002). Anthem gets healthy. Insurance & Technology, 27(5), 45 -46. Retrieved from http://search.proquest.com/docview/229318797?accountid=10345 22 Aetna gets green award for paperless contracting for health care professionals. (2011). Health & Beauty Close -

Up, Retrieved from http://search.proquest.com/docview/873825533?accountid=10345

Driving Forces23

Force Comments

Quality Control Measures

Quality Control Measures - Medicare uses Outcome Based Quality Improvement (OBQI) to measure the quality of home health care patients receive. The method monitors specific goals of home care, such as

reduced hospitalization rates. Doctors collect patient data to measure outcomes, and then compare company or agency results to benchmarks,

enabling health care providers to determine the strength and weakness of their performance. OBQI has been used in a pilot program to determine payments based on the value-based purchasing system. The method may

continue to be used as value-based purchasing is expanded throughout the industry.

Accountable Care

Organizations

Accountable care organizations, or ACOs, are designed as a way to

coordinate all of a patient’s care across all doctors and specialists. Experts say that ACOs will eliminate redundancies and inefficiencies and deliver better care, since all doctors will be notified of patients' medicines and

treatments as well as progress. Participating home health agencies (HHAs) will be eligible to receive a portion of savings that result from the

program, which CMS expects to add up to $940 million in the program's first four years.

Favorable Demographics

Demand for home health care will increase driven by the sheer number of older Americans. The US population 65 and older is expected to increase

by 36 percent between 2015 and 2025. Because of medical advances, many of the medical conditions these people may suffer from will be

better treated at home than in a hospital or nursing home.

23

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Porter’s 5 Forces24

Force High/Moderate/Low Comments

Buyer Power Moderate The US healthcare system is heavily reliant on health insurance companies, both private and not-for-profit,

due to the non-existence of a universal healthcare insurance system and

stipulations under President Obama's Patient Protection and Affordable Care Act of March 2010.

Supplier Power Moderate Suppliers to healthcare providers include

pharmaceutical companies, healthcare equipment suppliers, and qualified staff.

Such suppliers are usually large, multinational pharmaceutical companies who possess strong negotiating power due

to their sheer size and scale.

Threat of New Entrants

Moderate New entrants face competition from large, existing incumbents already benefit from a

skilled staff base, a good reputation and an existing patient base. Individual buyers face fewer switching costs than

larger buyers, such as insurance companies, whose policies offer access to

treatment in certain hospitals.

Threat of Substitutes Moderate One possible substitute for traditional healthcare services is alternative medicine. These may be based on

cultural, or historical, traditions, rather than on scientific evidence, and include

homeopathy, herbal medicine and acupuncture.

Rivalry Moderate In the healthcare providers sector,

specialist hospitals to small, rural health clinics. These larger hospitals face intense rivalry, and tend to compete

on efficiency, quality of care and price. Improvement in any of these areas

means more patients at the hospital, thus translating into higher revenues.

24 24 http://web.b.ebscohost.com.falcon.lib.csub.edu/bsi/command/detail?sid=c08b05b7-186e-4b18-ac3b-6300571e014a%40sessionmgr114&vid=14&hid=105&bdata=JnNpdGU9YnNpLWxpdmU%3d#db=buh&jid=EU3Y

Generic Competitive Strategy

Competitor Generic Competitive

Strategy

Comments

Anthem Low Cost Anthem provides quality care at a low cost. They believe that the best health care

coverage helps people stay healthy. When it’s affordable, people have access to the

best physicians, specialist and hospitals through this insurance company. They help ensure that the care is accessible.

Aetna Low Cost Their health system is about saving money

and keeping people healthy. They work with doctors and hospitals to align the

economic incentives for everyone to stay healthy.

Market Sizing

COMPANY: Anthem

Product/service Health Care

Country/region/locality California

Customer profile Hispanic Families of 4+

Income: 100,000

Dual income

Homeowners

2+ children

Purchased a new car within the last 2 years

Demographics &

Economic trends

Hard Data Assumptions:

California Population: 37,253,95625

Household income over 100,000+=29% 26

38% of population is Hispanic27

Homeowners is 60%28

30% of 4 or more people in household29

10% of people who purchased a new car in 2 years (320 million U.S populations/31 million in new vehicle sales in

2013 and 2014)30

Anecdotal Assumptions:

Average monthly cost of health insurance for family $330

Educated Guess Assumptions:

10% will purchase health insurance

Market size estimate 37,253,956x 29% x 38% x 60% x 30% x 10% x 10.3x 330x 10% =$2.51 million

25 http://factfinder.census.gov/faces/nav/jsf/pages/community_facts.xhtml 26 http://factfinder.census.gov; INCOME IN THE PAST 12 MONTHS (IN 2013 INFLATION-ADJUSTED DOLLARS) 2009-2013 American Community Survey 5-Year Estimates 27 http://factfinder.census.gov; Race and Hispanic or Latino Origin: 2010 more information 2010 Census Summary File 1 28 http://factfinder.census.gov; General Housing Characteristics: 2010 more information 2010 Census Summary File 1 29 http://factfinder.census.gov; OCCUPANCY CHARACTERISTICS more information 2009-2013 American Community Survey 5-Year Estimates 30 http://online.wsj.com/mdc/public/page/2_3022-autosales.html

Market Positioning Maps

Y

X

X is the cost of insurance from each company.

Y is the quality of care you receive from both insurances.

Y also represents the different types of insurance offered.

With Aetna you are given many different choices when it comes to finding a coverage

plan that works for you.

With Anthem you are only given three different types of coverage.

Cost of Insurance: $100.00 to $2,200

-Health Plans

-Pharmacy

-Health Insurance Exchange

-Medicare Plans

-Medicaid Coverage

-Dental Insurance

-Vision Insurance

-Insurance through Work

-Student Insurance

-International Insurance

-Government & Labor Insurance

-Supplemental Insurance

Anthem

Aetna

Internal Analysis Tools

RBV Analysis

COMPANY: Anthem

RESOURCE: The Anthem website

Resource Features Yes/Somewhat/No Comments

Valuable Yes Everyone needs health care insurance because if

and emergency happens you will be able to afford the cost rather than paying out of pocket which most people cannot afford.

Rare No Health insurance is offered everywhere and now is required for everyone.

Hard to Imitate No No, mostly all insurances have the same polices, standards, and guidelines.

Well-Organized Yes The process with applying and having Anthem

health insurance is simple and easy. The offer several different insurance plans along with a free

quote. The online website makes is easy to access your account and understand what your health insurance plan is.

Value Chain Benchmarking

Factor Weight Weight Justification

Products

and Services

50% The products and services are very important to the health care industry. Each individual gets a custom plan that fits their needs and is affordable. Health and wellness is crucial to our well-being and we

need health care services available for everyone.

Advertising 10% Health care industries use very minimal advertising to promote their services. Ever since the Obama health care form has passed everyone

is required to have health care insurance which has revolutionized the health care industry.

Human

Resources

15% This department is important to the health care field. The health care

environment and health care workforce needs to be able to adapt this knowledge to their individual health care organization’s needs and goals

Pharmacy 25% The pharmacy department is very important to the health care world.

It is important that the health care insurance has regulatory control and drug management, community pharmacy, hospital pharmacy, the

pharmaceutical industry, academic activities, training of other health workers, and research. In all these fields, their aim is to ensure optimum drug therapy, both by contributing to the preparation,

supply and control of medicines and associated products, and by providing information and advice to those who prescribe or use

pharmaceutical products.

Weighted

Overall

Strength

Rating

100%

Factor Weight Anthem

Strength

Rating

Score Comments

Products

and Services

0.40 9 3.6 Anthem offers many services that are great

quality. The offer Health insurance, dental, and vision. They offer plans for individuals, families, and companies. Their online services make it

easy to find a doctor, urgent care, refill prescriptions, and check a claim. I give them a 9.

Advertising 0.10 3 0.3 Health care insurances do not use advertising to

solicit their products or services. The may pay for one commercial to put their name out their

but most insurance company’s are found through their employers or word of mouth. I rate them a 3 due to low advertising.

Human

Resources

0.10 6 0.6 The human resources section is helpful when it

comes to insurance claims or issues. They use other companies to give their members and

providers certain types of services, like Utilization Management or Case Management. The human resource department makes sure that

these types of services are approved by law and allowed by their contracts beforehand. I rate

them a 6 due to no interaction with customers.

Pharmacy 0.20 8 1.6 The pharmacy department is an important aspect to the health care industry. With Anthem you can register prescription benefits and be

connected with finding a doctor specific to your plan, check on claims and payments, and refill

your prescription. Medicine helps heal any health condition. This factor is rated an 8.

Customer

Service

0.20 7 1.4 Anthem has been health connecting one another through the health care system. They are

dedicated to delivering better care to the members, providing greater value to the

customers and helping improve the health of our communities. Their website is easy to navigate making it easy to gather health care information.

They connect you with doctors that fit your needs and set you up on a pharmacy plan.

Overall the customer service is mainly available online thus giving a score of 7.

Weighted

Overall

Strength

Rating

1.00 7.5

Factor Weight Aetna

Strength

Rating

Score Comments

Products

and Services

0.50 7 3.5 Aetna offers several services such as health

insurance, dental, vision, pharmacy benefits, retiree health plans, life insurance, disability insurance, behavioral health benefits,

international insurance, and health expense funds. Their website offers ways for you to

search for a doctor right for you and an affordable plan. This scored a 7 because they have a lot of information to navigate through.

Advertising 0.10 2 0.2 Advertising is low when it comes to health care. People are normally assigned a health care provider through their employer. Everyone is

required to have health care insurance due to the Affordable care act. This is rated low due to the

face that it’s rarely advertised. This is rated as a 2 due to the fact that they are unheard of.

Human

Resources

0.10 5 0.5 Human recourse focuses on several different aspects such as consumers will increasingly be

in charge of their own health care access, have affordability of, high-quality health care. Also,

they are accountable for care organizations which are the future business model for provider/health plan collaboration. They are

rated a 5 because they are not customer focused.

Pharmacy 0.15 8 1.2 Pharmacy is important in all health care. Customers need affordable access to their health

care pharmacy. Medicine helps heal and keep health issues stable. Aetna does not cover all the same medication like other companies do. They

are rated an 8 because not everyone’s medication is covered by this insurance group.

Customer

Service

0.15 6 0.9 Health information technology will is a key

enabler in helping people live healthier lives. Aetna’s form of contact is standard like any other company. They make you research your

question first before they release their number. This makes it difficult for customers to find an

answer quickly. Due to efficiency they are rated at a 6.

Weighted

Overall

Strength

Rating

1.00 6.3

Leveraging International/National/Regional Competitiveness

COMPANY: Anthem

Location Advantages Comments

Anthem renewing marketing

Cincinnati-based Anthem Blue Cross and Blue Shield are getting its ducks in a row to make a bigger dent in the Northeast Ohio health insurance market. The company is rolling out a more regionalized

approach to sales and marketing and is trying to establish stronger ties in the local community. Anthem also wants to increase its brand name

recognition through advertising and by playing a greater role in community events.31

Value Chain

Improvements

Comments

Anthem Announces Primary Care Practices to Participate in

Historic Public-Private Partnership to

Strengthen Primary Care

Anthem Blue Cross and Blue Shield in Colorado announced today that physicians working with 73 practices in Colorado have been selected to participate in a groundbreaking initiative to advance primary care and

improve the accessibility and affordability of quality health care through a partnership with the Centers for Medicare & Medicaid

Services. Anthem's parent company is working with nearly 900 providers selected to participate in the partnership across its affiliated health plans in Colorado, Kentucky, Ohio and New York. 32

Profit Sanctuaries Comments

By wide margin,

Anthem still; Though year-to-year

share is flat, it still commands more than half the market, while

Cigna gains some ground

By wide margin, Anthem still Though year-to-year share is flat, it still

commands more than half the market, while Cigna gains some ground Anthem Blue Cross and Blue Shield's share of the Indianapolis area has

leveled off, even though it still insures more than half the commercial market-or three times as much as its nearest competitor. Anthems top states where they make the most revenue from is Colorado, California,

Ohio, Michigan, and Illinois. 33

31 http://www.lexisnexis.com.falcon.lib.csub.edu/lnacui2api/api/version1/getDocCui?lni=3SRH-18K0-004M-

P481&csi=270944,270077,11059,8411&hl=t&hv=t&hnsd=f&hns=t&hgn=t&oc=00240&perma=true 32 http://www.lexisnexis.com.falcon.lib.csub.edu/lnacui2api/api/version1/getDocCui?lni=56DR-KMT1-J9YY-Y2XP&csi=270944,270077,11059,8411&hl=t&hv=t&hnsd=f&hns=t&hgn=t&oc=00240&perma=true 33 http://www.lexisnexis.com.falcon.lib.csub.edu/lnacui2api/api/version1/getDocCui?lni=5265 -2Y31-F164-

001B&csi=270944,270077,11059,8411&hl=t&hv=t&hnsd=f&hns=t&hgn=t&oc=00240&perma=true

SWOT Analysis

Anthem34

Strengths -Enhanced financial leverage

Enhanced financial leverage or solvency

position of the company strengthens its

ability to borrow and repay money,

which in turn enhances its business

operations. The solvency position of

EHI is improved due to limited debt

funding than equity. The company

recorded a debt-to-equity ratio of 0.18

at the end of FY2013, marginally lower

than 0.21 and 0.26 in FY2012 and

FY2011 respectively. At the end of

FY2013, the company recorded 5.4%

increase in equity from US$539.4

million in FY2012 to US$568.7 million

in FY2013. Strong solvency position

indicates utilization of lower financial

leverage and its comparatively higher

equity position, underlining the better

creditworthiness of the company.

Weaknesses- Limited scale of operations

Limited scale of operations compared to

competitors may be a concern for the company.

Operations of EHI are limited as compared to its

competitors operating in the US. Companies

such as The Hartford Financial Services Group,

Inc. and Zurich Insurance Group have wide

geographic operations compared to EHI. The

company is at a major disadvantage. For

instance, Hartford provides insurance products

and services in Argentina, Japan, Ireland, the

UK and the US. Zurich Insurance offers

insurance products and services in 170 countries

across the Asia Pacific, Latin America, North

America and Europe and other markets. EHI

offers workers‟ compensation insurance

products and services only in the US. Limited

operating scale presence puts the company at a

risk as any adverse development in the political,

economic or climatic environment of the region

might have an adverse impact on its business. It

also restricts its market share and limits growth

options. Therefore, limited operations compared

to its competitors may put competitive pressure

on the company’s operations, whilst limiting the

revenue sources for company.

Opportunities- Decreasing

The company stands to benefit from

decreasing unemployment rate in the

US. According to the Bureau of Labor

Statistics. The decrease in

unemployment rate was due to the job

gains in the manufacturing,

construction, mining and wholesale

trade sectors. The construction sector

added about 48,000 jobs in January

2014 manufacturing added about

21,000 jobs, wholesale trade added

about 14,000 jobs and mining added

about 7,000 jobs.

Threats- Changing regulations

The company’s businesses are regulated by

various governmental and regulatory

authorities. Changes in government policy,

legislation or regulatory interpretation may

adversely affect the company’s product range,

distribution channels, capital requirements and,

consequently, reported results and financing

requirements. These changes include possible

changes in statutory pension arrangements and

policies, the regulation of selling practices and

solvency requirements. Thus, the changes in

government policies and regulations may have a

negative impact on the company’s growth and

expansion strategies.

34

http://search.proquest.com.falcon.lib.csub.edu/docview/1654943327/8564D52C4EC94C4BPQ/1?accountid=10345

Aetna35

Strengths- Strong liquidity position

The company's current ratio was 2.98 at

the end of the FY2011. This was above

the current ratio of its competitors such

as Arotech Corporation (1.36). A higher

than industry’s average current ratio

indicates that the company is in a

stronger financial position than other

companies in the industry. Therefore, a

strong cash and liquidity position

provides the company an advantage

while funding any potential opportunity

arising in the market.

Weaknesses- Weak financial performance

The company delivered weak financial

performance during FY2011. The company’s

total revenue decreased by 9.07% from

ILS138.44 million in FY2010 to ILS125.87

million in FY2011. The operating income

slumped by 59.22% annually in FY2011.

Net income also declined by 16.73% as

compared to previous year. Weak financial

performance may affect its growth and

expansion plans and decreases investors'

confidence on the company.

Opportunities- Rising demand for UAVs

The company may benefit from the

increasing demand for UAVs across the

globe. The demand for unmanned aerial

systems in the US is expected to double

from over US$2 billion in 2011 to over

US$4 billion in 2020. This growing

demand is attributed to the increasing

usage of UAVs by the global prime

military forces for reconnaissance and

attack and for civil purposes such as

security, firefighting and pipelines

surveillance. On similar lines, the

company offers military control and

electrical systems for UAVs. Therefore,

growth potential in UAV market is

expected to offer huge opportunities to

enhance its business operations.

Threats- Rapidly changing technology

The company operates in a highly competitive

market that is subject to rapid technological

changes. Introduction of products

using new technologies or the adoption of new

industry standards will make existing products

or products under development obsolete or

unmarketable. In this scenario, to compete

effectively, the company has to continuously

innovate and introduce new products that gain

market acceptance. Unless the company

understands the customers’ requirements

and adapts to emerging technologies in the

market and introduces new products and

solutions, its business may be affected.

35

Http://search.proquest.com.falcon.lib.csub.edu/docview/1652879307/F38228BB77C74D11PQ/1?accountid=10345

Here are some suggestions on how Anthem can strengthen their SWOT analysis:

1.) Strengths: Anthem’s substantial earnings growth need to continue to grow by improved operating cost structure, strategic acquisitions, efficient capital management and

investments to support improvement in healthcare affordability.

2.) Weaknesses: Anthem needs to expand its company in other countries if they want to grow into a bigger company. Being limited only to the U.S has limited their options.

3.) Opportunities: They need to continue with innovation which helps creates jobs. Anthem benefits from an increase in jobs because the most employees a company has the more

people will sign up for health care which Anthem is offered at most companies.

4.) Threats: Aggressively consider the new changes and reforms in the health care industry. Keep up with the new rules and regulations and continue to keep the policies current.

Financial Analysis Tools

Anthem Inc Aetna Inc Industry

Profitability (operating

Margin)

(71,122.40 - 66,679.50) =

4442.90 / 71,122.40 = 6.2%36

(47,294.60 -

44,106.40) = 3,188.20 / 47,294.60 =

6.7%37

Gross profit=100-90.6=9.4%

Liquidity (Current

Ratio)

29,745.8/ 16,351.5=1.81%38

366.3/

431.5=0.84%39

Current ratio= 1.3

Leverage (Debt-to-

Assets)

15,263.30 / 62,058.20 =

24%40

7,913.40 / 53,025.60

=14.9%41

Debt Worth=1.3

Activity (average collection

period)

0/ 41,860=042 0/ 24,733.0=043 Average collection

Ratio=(14.9)(1.6)/100/365=87.02

Anthem has a higher gross margin compared to Aetna. Both companies are above the industry average percentage.

Anthem’s current ratio is well above the industry number, but Aetna is below both ratios.

Both debt-to-asset numbers of both companies are well above the industry average number. Anthem and Aetna are both at zero for the days of inventory while the average collection period

is well above 50%.

36 http://www.google.com/finance?q=NYSE%3AANTM&fstype=ii&ei=FLvBVNu4KZG2iAKT04DwAQ 37 http://www.google.com/finance?q=NYSE%3AAET&fstype=ii&ei=nbHBVKC8IOKsiQLbioDYAQ 38 http://www.sec.gov/Archives/edgar/data/1156039/000119312512072739/d277395d10k.htm 39 https://www.google.com/finance?q=NYSE:AET&fstype=ii&ei=nbHBVKC8IOKsiQLbioDYAQ 40 http://www.google.com/finance?q=NYSE%3AANTM&fstype=ii&ei=FLvBVNu4KZG2iAKT04DwAQ 41 http://www.sec.gov/Archives/edgar/data/1122304/000112230414000037/form10 -k.htm 42 http://www.bloomberg.com/research/stocks/financials/financials.asp?ticker=ANTM 43 http://www.bloomberg.com/research/stocks/financials/financials.asp?ticker=AET