Blue Cross Newsletter

August 6, 2003




To: All Blue Cross Contracting Providers
From: Michael M. Mattox, President and CEO
Blue Cross and Blue Shield of Kansas, Inc.
An Independent Licensee of the Blue Cross and Blue Shield Association
Subject: Kansas Supreme Court Decision Relating to Proposed Affiliation with Anthem Blue Cross and Blue Shield

As I'm sure you have learned by now, a decision has been made regarding our proposed affiliation with Anthem Blue Cross and Blue Shield. The Kansas Supreme Court has overturned the Shawnee County District Court's decision, thereby ending our plans to affiliate with Anthem BCBS.

Even though the outcome was not what we desired, we are anxious to move forward. We have a strong Blue Plan in Kansas today and are making good strides toward regaining profitability after experiencing several years of significant losses. However, we don't believe we will be as competitive in the years ahead without finding solutions to the challenges we face.

The business reasons that caused us to pursue an affiliation in the first place are still valid. Single-state Blue Plans such as ours face stiff competition from large, national insurance companies who have more financial resources. The size of our market is declining, meaning there are fewer members available to share the costs of doing business. We are in a period when medical costs are rapidly increasing and the demand for health care services is skyrocketing, forcing premiums up for all those with insurance coverage.

In order to remain competitive in this market, our board of directors, senior management and employees will work together to find solutions to these challenges. Remaining as a single-state Blue Plan means we are going to have to be even more efficient.

Some things, however, will remain the same. We remain proud of our 61-year history in Kansas; it is our top priority to ensure future generations can continue to feel secure obtaining their health care coverage from a locally managed and operated Blue Plan. In addition, the relationship we have enjoyed with our Kansas providers has been integral to our mutual success, and we hope and expect that close relationship will continue.

I understand you are likely to have many specific questions regarding the future of our company. We will continue to keep you informed as we move forward.