Health Plan Administration Business Plan

Executive Summary

Southeast Health Plans, Inc. is a service company that will provide health plan administrative services to self-insured employers. The company will concentrate on employers with 50 to 500 employees. Many of these employers have current HMO, PPO, or major national insurance carrier health plans. While the majority of employers with 500 or more employees have at least some element of self-insurance incorporated into their health care programs, our target market is often ignored by the major national insurance companies. While more than 80% of companies with 500 or more employees are self-insured, the management of Southeast Health Plans has identified that less than 25% of Atlanta area companies with 50 to 500 employees have self-insured plans.

The market for self-insured and administrative services consist of those companies that are currently self-insured and companies that have other types of health plans that will be encouraged to shift to self-insurance. One factor in the transition to self-insurance is the availability of quality administrative and consultative services. Southeast Health Plans, Inc. is led by experienced management and has formed a strategic alliance with Blair Mill Administrator, a wholly owned subsidiary of Blue Cross/Blue Shield of Pennsylvania, for the purpose of providing first class benefits management services to its target market.

Southeast Health Plans, Inc. will achieve revenue of more than $5 million in five years with a net profit after tax of $1.6 million. The company will turn profitable in year three with after-tax earnings of $560 thousand. As a marketing organization and service provider, margins will be extremely high with gross margins above 80% (less only sales incentive costs) and approaching 50% after all operating expenses, once market penetration has reached maturity.

The key to success for Southeast Plans, Inc. will be the ability to attract the initial capital in order to successfully market its services in the metro Atlanta area and in northern Georgia. Adequate professional sales staffing is essential. The company must then expand a successful formula throughout Southeastern markets. Cost control, particularly with regard to sales and marketing programs, will enable controlled expansion that is fully funded by internal cash flow.

1.1 Objectives

The objectives for the company are:

1. To initiate co-operative marketing utilizing Blair Mill advertising executions with media in the Atlanta metro market.
2. To hire sales staff both currently identified and unidentified to implement sales lead follow-up strategy.
3. To have at least 4,800 cumulative employees under management by the end of year one.
4. To approach break-even by the end of year two holding total loss for the second year under $100 thousand while increasing market share.
5. To shift to earnings in year three and to accelerate gross margin contributions by building market maturity on top of infrastructure.
6. To expand regionally with both media and sales personnel to penetrate new markets while consolidating service capability.
7. To constantly achieve cost benefit through an expanding provider network while not compromising patient care.
8. To have more than 98,000 cumulative employees under management by the end of year five.

1.2 Mission

Southeast Health Plans, Inc. is dedicated to providing small and mid-size employers with a comprehensive benefits administration program that will enable employers to control health benefits costs while allowing employees within the plan to have access to quality health care. By combining self-insurance with stop-loss programs and efficient plan administration Southeast will provide to its clientele, both employers and employees, the best of health care with the minimum of restrictions and the broadest individual choice of providers. Southeast will deliver a balance of quality care and freedom of choice at a fair price.

1.3 Keys to Success

The keys to success in this business are:

1. 1. Marketing. Southeast Health Plans will have the ability to sell both directly to employers and through independent insurance brokers and agents. It will be necessary to establish name recognition among more established programs. It is essential that media budgets be controlled and that closing ratios of at least 5% of leads per year be maintained.

1. 1. Service quality. The services provided by Blair Mill Administrators are already state-of-the art among small-employer providers. The value added experience of the Southeast Health Plans, Inc. management team and their provider networks will ensure customer satisfaction. It is a necessity that clients maintain satisfaction both with service and plan cost to minimize client erosion and to combat competition. Renewals should exceed 85% of established clients.

1. Controlled growth. Growth needs to be aggressive with rapid expansion to new geographic markets but also must focus on profitability. Each established market must mature as new markets develop so that growth can be internally funded. Cash flow management is essential. Both market expansion and media effectiveness must be constantly tested, and then reviewed or refined as required.