MPR: Blue Cross and Blue Shield Is Tobacco Case's Other Plaintiff

Blue Cross and Blue Shield
Is Tobacco Case's Other Plaintiff
By Laura McCallum
January 21, 1998

One key aspect of the Minnesota tobacco case has received little coverage - the involvement of the state's co-plaintiff, Blue Cross and Blue Shield of Minnesota. It remains the only private health plan in the country to sue tobacco, and the company hopes its gamble will pay off in health-care savings.

FOUR YEARS AGO, when the state and Blue Cross and Blue Shield of Minnesota decided to jointly sue the tobacco industry, it was a much riskier proposition. Blue Cross President and CEO Andy Czajkowski says back in 1994 tobacco companies had never lost a lawsuit, and seemed invincible.

Czajkowski: At the time, they had a take-no-prisoners sort of approach, and it was very difficult to take them on, so it was sort of a lonely road.

Czajkowski says Blue Cross Blue Shield of Minnesota felt it had a responsibility to address the nation's number-one health problem. Czajkowski at one time estimated tobacco-related illnesses cost the company between $350 million and $400 million in the last two decades, although costs are now being kept confidential until they're unveiled in court. Czajkowski would not confirm rumors that Blue Cross Blue Shield has been secretly negotiating a settlement in the case, but said any such agreement must include three criteria, the same three the attorney general's office says are necessary for a settlement.

Czajkowski: The first would be that we have disclosure of all of the secret documents and information. Secondly, that we have meaningful targets in terms of the reduction in smoking among youth, and cessation of marketing to youth. And third would be compensation for the financial losses associated with the industry's illegal conduct.

It's that third piece of the puzzle that has caused many in the health-care industry to question how the money would be spent. As a non-profit health services corporation, Blue Cross and Blue Shield has no stockholders, so Czajkowski says the money would benefit its 1.7 million members, possibly through smoking cessation programs, education, and research. If Blue Cross uses the money to reduce premiums, that could give the company an advantage over its competitors in the health care market. Doctor Jim Ehlan is president of Allina Health System, whose Medica health plan covers a quarter of Minnesota residents:

Ehlan : Blue Cross, if they are the beneficiaries - and they should be, given the effort they've made - will have a set of decisions to make about the resources they get, but it would be a bad outcome if an undue number of dollars flowed to Blue Cross that then were not made available to improve the health of the state of Minnesota.

But Ehlan says the lawsuit will ultimately benefit all Minnesota health plans through reduced costs, if the money goes toward research and prevention. Ehlan says Allina's own claims data show smoking contributes to 40 percent of the company's costs, either directly or indirectly, and he applauds the state and Blue Cross and Blue Shield for taking on such a public health menace. At the time the lawsuit was filed, Allina was in the midst of a merger, and Ehlan says the company decided to focus its resources on anti-smoking programs. Allina recently became the first health plan to cover nicotine patches and medications for smokers trying to quit.

Minnesota's other major player in the health care marketplace - Health Partners - also chose not to get involved in the lawsuit, but has worked to eliminate tobacco's market. Senior vice president and corporate counsel Andrea Walsh:

Walsh: Health Partners has really had a strategy complementary to the attorney general's lawsuit - our counter-advertising campaign ... our efforts to help provide health education and cessation to our members who want to quit smoking.

Health Partners didn't indicate any interest in suing tobacco companies, but Allina says it has not ruled out filing its own suit. And from a national standpoint, Blue Cross Blue Shield's involvement in Minnesota's lawsuit brings a new player to the table - health plans. Father Richard McGowen, an economics professor at Boston College who's written a book about the tobacco industry, says if Blue Cross and Blue Shield is successful, that opens the door for the lawsuits of other health insurance companies.

McGowen: Certainly it adds the insurance industry, basically, cause Blue Cross and Blue Shield is part of that, as a pretty powerful stakeholder going against the tobacco industry. Up to now, I mean, it's strictly been the tobacco industry against state governments. When you throw in the insurance companies, that's a very very powerful force.

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