OUR GROWTH STRATEGY
WellPoint will continue to grow in California's managed care market by meeting the changing needs of our customers. Our in-state growth strategy includes the following components:
Innovation in product design
Because no single managed care solution is right for everyone, WellPoint offers a continuum of coverage options unparalleled in the industry. As customer needs change, we continue to innovate by focusing on increasing the value of our offerings. For example, in 1995 WellPoint launched a first-of-its-kind co-pay PPO plan for individuals and small groups that combines the convenience of an HMO' s predetermined payment schedule with the freedom of choice offered by a PPO.
The innovative co-pay PPO eliminates annual
deductibles and replaces them with low, HMO-style co-payments for in-network
provider services. The plan encourages members to seek medical care from
WellPoint's large network of 39,600 participating physicians and 361 hospitals.
The plan also encourages members to focus on preventive care because they
no longer have to satisfy deductibles before medical services are covered.
For the state's growing senior population, WellPoint has introduced an HMO-based plan called Senior CaliforniaCare in 17 counties. With this plan, all medical care-except urgent and emergency out-of-area services-is provided or coordinated through a primary care physician of the member's choosing. Senior CaliforniaCare complements WellPoint's PPO-based Medicare Select II plan, which allows members to visit any network physician or specialist for a $5 co-payment while maintaining full Medicare benefits for out-of-network services. Further the plan eliminates all out-of-pocket costs for members using hospitals in WellPoint's statewide provider network.
WellPoint's ability to design solutions that meet market needs is, of course, a transportable strength and critical component of our national expansion strategy.
Product integration and bundling In addition to creating hybrid plans, WellPoint also integrates and bundle products in order to provide employ with administrative ease and better pricing than they could obtain by purchasing different types of coverage separately.
WellPoint's most visible success in this area is UniCARE Integrated, a combined workers' compensation an medical benefits product.
UniCARE Integrated provides savings and simplicity to employers
by offering-through a common source for billing and claims filing-the option
of directing injured workers to selected physicians in WellPoint's extensive
PPO and HMO networks. In addition, the employers who select this product
tend to have risk profiles that make their business attractive to WellPoint.
Specialty product development WellPoint continues to add to its menu of specialty products so that customers can obtain all of their health-related employee benefits from a single source. Specialty products include pharmacy benefit management, dental plans, a "check up" preventive care program, and, with the acquisition of the MassMutual business, life and disability insurance plans, COBRA and flexible benefits account administration. Our most recent specialty product addition is a managed behavioral health program that offers managed employee assistance and insured mental health care coverage.
WellPoint will expand its array of specialty products by designing new offerings and through selected acquisitions. In 1995, WellPoint acquired interests in dental practices in the San Francisco Bay area to form a managed care dental service organization. This approach offers a more attractive product to employees by introducing effective managed care techniques to the dental field.
Customer-segment focus WellPoint sees opportunities to increase market share in every customer segment: individual/small group, large group, senior, and Medi-Cal.
In the individual/small group market, our new co-pay PPO and hospital deductible HMO products are increasingly popular. While there is increased competition in this market segment, a number of smaller, less efficient plans are not likely to survive over the long term.
Within the large group segment, the trend toward consolidation of product options by employers continues, and this is good for WellPoint. In addition, we expect enhanced employer interest in our management services product in 1996.
For management services customers, WellPoint functions
as a health plan manager, providing actuarial and contract compliance support,
medical cost and utilization management, quality review, benefit design
and claims adjudication services. This business enables WellPoint to establish
relation- ships with large commercial customers, attract the best providers
to our networks, and cross-sell our products as needs arise. Another benefit
of this business is that it 
provides a good return on equity
with a very low capital investment requirement.
Our PPO- and HMO-based products for senior citizens offer another opportunity for growth, especially as the national debate over Medicare spending heats up. With financing reform likely, plans that offer choice and flexibility will become increasingly attractive to senior customers.
One of the most exciting near-term growth prospects for WellPoint lies in the growing Medi-Cal market. California's Department of Health Services has awarded WellPoint contracts to cover the Medi-Cal populations of five counties-approximately 815,000 people. This was the largest single block of business that WellPoint has ever received. We also won a Medi-Cal contract from Orange County's organized health system and expect to be working with Los Angeles County's local initiative Medi-Cal program during 1996.
Quality-and cost-conscious plan management At the same time that we are aggressively pursuing top-line growth, WellPoint continues to be quality and cost conscious. During 1995, WellPoint launched an innovative recontracting program to improve the quality and competitiveness of the hospitals in our networks. Through this "partnerships for quality" program, WellPoint is rewarding, with preferred status in its networks, cost-effective providers who demonstrate a commitment to quality and the financial strength to compete in California's market-driven health care environment.
WellPoint is addressing the issue of quality on several other fronts, including prevention, disease-state management, outcomes research, and provider feedback programs. In addition to our check-up centers, which offer screening and testing services to promote healthier lifestyles, we help our members understand recommended screening procedure frequencies for a full spectrum of potential illnesses and conditions based on age. Our disease-state management initiatives include asthma, diabetes and coronary-risk programs. WellPoint has also conducted and publicized extensive research regarding avoidable hospitalizations and adverse pregnancy outcomes. The Company's HMO scorecard, in its third year of operation, serves as a quality and service improvement tool for key medical groups in our networks.
Technology for customer satisfaction WellPoint has developed several technology-based programs to enhance customer satisfaction. For example, the Company's state-of-the-art customer inquiry tracking system helps our managers quickly check the status of customer queries, offer effective solutions, speed up the time it takes to solve problems, and track outcomes.
Another system, called Easy Bill, uses optical character recognition to ensure greater accuracy and speed in claims processing. Easy Bill also aids employers in tracking and reconciling invoices and improving productivity.
In addition, we have improved WellPoint's computer-aided voice response system. The system now enables customers and providers to obtain instantaneous on-line verification and fax confirmation of key plan-related information including a member's benefit level and coverage eligibility.
In January 1996, WellPoint also established a site on the Internet's World Wide Web to make it easier than ever for our customers to understand our full menu of product offerings.