2016 Annual Report

Every few years a milestone anniversary

comes along that gives one pause to reflect

on the past and look forward to the future.

As a company, Blue Cross and Blue Shield

of Kansas has a special opportunity to do

that during 2017 as our company marks 75

years in business. We are a locally owned

and operated company that has been part

of the Kansas landscape since 1942.

We were not the first insurance company

in Kansas. We are, however, the product of

Kansans who very early on saw the need

to pool their resources to help pay for their

health care needs.

To remind myself of that fact – that we

were literally built by the Kansans we

serve – I have for years carried in my

padfolio a copy of a 1949 ad from The

Soldier Clipper. I even share it when I meet

new employees. The ad announced that

the Blue Cross and Blue Shield benefit

plans were coming to Jackson County,

and explained that the County Farm

Bureau was enlisting volunteers to offer

memberships in their towns and townships

during a week-long, county-wide drive. My

copy might be a bit blurry, but the message

remains clear decades later: This company

was built by Kansas residents who saw

the community-wide value of insurance

and worked together to educate and enroll

members of their community.

It is this idea of Kansans serving Kansans

that has set our company apart from

others. From those first three employees in

1942 to around 1,600 today, our employees

have dedicated themselves to providing

peace of mind and access to a better

quality of life for all Kansans. As a mutual

insurance company – meaning Blue Cross

and Blue Shield of Kansas is owned by our

policyholders – our employees know that

their first duty is to our members. That is

why we are recognized for our World Class

customer service.

Other insurance companies may come and

go, but I am confident that Blue Cross and

Blue Shield of Kansas will remain a fixture

in our state’s landscape. Our employees

live and work in the communities we

serve, and recognize the importance of

service to their fellow Kansans. They

understand that part of our duty is being

good corporate citizens. They demonstrate

that commitment by volunteering and

supporting community agencies like the

United Way, American Red Cross and

March of Dimes.

Blue Cross and Blue Shield of Kansas is

never going to be a huge company, but

I am confident that we will always be

here for Kansas. More change is on the

horizon and we know how we’ll approach

the challenge: Commitment to serving

Kansans; showing compassion by providing

financial security during times of need; and

demonstrating an unwavering dedication

to the communities we serve.

We are Kansans serving Kansans.

That will not change.

Andrew C. Corbin

President/CEO

Blue Cross and Blue Shield of Kansas

We are Kansans serving Kansans. That will not change.

In the beginning, Blue Cross was managed by a handful of people who believed in commitment, compassion and community – values which continue to inspire and motivate us today.

Commitment means being there to

serve all Kansans – from large cities to

rural communities – at every stage of

their lives. It means that the premiums

members pay are the members’ money

– raised to be spent on their health

care, with just a small portion going to

administrative costs. And as a mutual

insurance company, our policyholders own

Blue Cross, meaning all excess funds are

held in reserve for them.

Commitment also means constantly

striving to offer a wide choice of benefit

plans, tailored to our members’ evolving

needs. And it means running a smart,

well-managed company that’s built to

last – adapting and thriving through major

changes in health care.

Commitment

Blue Shield of Kansas, allowing Kansans

the opportunity to purchase pre-paid

insurance to cover services provided by

physicians. The first Blue Shield contract

was effective Jan. 1, 1946, and cost 90

cents for an individual and $2.25 for a

family each month.

In the early days, it was everyday

Kansans who worked in their local

communities to enroll their neighbors,

family and friends in benefit plans during

county-wide drives. Blue Cross was a

pioneer in this community group method

of rating. As the public began to demand

more coverage options in the 1950s, a

greater emphasis was placed on writing

group benefits through employers, trade

It was a pair of legislative enabling

acts in 1941 and 1945, combined with

the sponsorship of Kansas hospitals

and physicians, that established

the companies that would become

Blue Cross and Blue Shield of Kansas.

In 1942, participating Kansas hospitals

each contributed $2 per bed to fund the

Kansas Hospital Service Association,

later known as Blue Cross of Kansas.

At first, the company offered one basic

benefit plan for inpatient hospital care

at a cost of 65 cents a month for an

individual and $1.30 for a family.

Four years later, in 1946, the Kansas

Medical Society sponsored Kansas

Physician’s Service, later known as

associations and chambers of commerce,

and optional benefit plans were created.

With the advent of Medicare in the

mid-1960s, we developed Plan 65, our

Medicare supplement insurance line

which remains popular today. Dental

coverage also became available in the

1960s, and 20 years later, life insurance

options were offered as well.

Since those early days, Blue Cross and

Blue Shield of Kansas has remained a

leader in adapting to the marketplace,

offering more coverage choices, optional

benefits and innovative plans to meet the

evolving needs of individual members

and employers.

Compassion means providing financial

security in a time of need. When

members or their loved ones are sick or

injured, they shouldn’t worry about how

to pay their medical bills. It means giving

members access to the doctors they

want to see and the hospitals in their

community through the largest provider

network in Kansas. And compassion

means providing programs for everyday

health and wellness, so our members can

live the highest quality of life possible.

Compassion

As advancements in health care equipment

and techniques have led to rising costs – a

trend that began as early as the 1950s

and continues today with blockbuster

pharmaceuticals and cutting-edge medical

equipment – the company has answered

by introducing forward-thinking cost

containment activities to hospitals and

doctors, and promoting healthier lifestyles.

Partnerships with hospitals and medical

providers form the very foundation

on which Blue Cross was built. These

relationships help Blue Cross create

medical policies with the input of

providers. A milestone in the company’s

cost-control efforts occurred in 1984

when a new approach to provider

contracting allowed us to secure more

competitive discounts on services. These

discounts continue to offer significant

savings to our members today, along with

the confidence that contracting providers

accept our payment as “payment in full.”

Even today, payment models continue

to evolve. In this decade, we have

introduced new value-based models of

reimbursement that focus on quality

and cost of care rather than number

of services provided. Patient-centered

medical home partnerships with a

growing number of providers in our

service area and new accountable care

organization agreements with hospitals

further reward services that result in

better health outcomes at lower costs.

Since electronic filing of claims first

replaced tedious hand-work in the 1960s,

Blue Cross has used the latest technology

to better serve members’ needs. Today

nearly 85 percent of the 19 million

claims we process annually go through

our electronic system without human

intervention – from filing to payment.

This ensures higher accuracy and faster

payments to our providers and members.

Emerging data analytic tools are helping

us position for the future as we adapt to

the changing needs of consumers.

Whether it was a statewide campaign

to discourage use of recreational drugs

in the 1970s, or the development of

one-on-one, nurse-delivered disease

and wellness programs in the 2000s,

the health of our members has long

been at the forefront of our work. Today,

that means adding telehealth benefits,

increasing online self-service options

and wellness tools, as well as opening

more channels – like text messaging and

social media – for communicating with

our members.

Throughout our history, Blue Cross and

Blue Shield of Kansas has been active

in developing ways to contain health

care costs while working to improve

our members’ health and enhance their

overall health care experience.

Community means that Blue Cross, its

leadership and employees play an active

role in the betterment of the Kansas

communities we serve, those very

communities that built our company in

our earliest days.

Blue Cross has always been committed

to giving back to our members, business

partners and all Kansans. We have

volunteered time and donated money

– as a corporation, Foundation, and

as individual employees – throughout

our 75 years. Our people are dedicated

contributors, volunteer countless hours

and serve as board leaders for many

organizations. For decades, our employees

have generously supported United Way,

March of Dimes, Project Topeka and

Project Salina, Junior Achievement, Meals

on Wheels and many more.Community

In 1989, the company led development of

The Caring Program for Children, in concert

with the Kansas Medical Society and

Kansas Hospital Association. This program

offered free health insurance to eligible

Kansas children, serving more than 13,000

during the program’s 10-year existence.

Raising awareness of and reducing

domestic violence in Kansas has been a

focus in recent years, not only to provide

In 2005, the company incorporated the

Blue Cross and Blue Shield of Kansas

Foundation. The Foundation seeks

to fund programs and activities that

encourage health and wellness. Its

signature program, Healthy Habits for

Life, helps nurses and teachers deliver

at-school programs aimed at reducing

children’s cardiovascular risk, increasing

their physical activity and helping them

environments and lifestyles in Kansas

communities. The Blue Health Initiatives

program has multiple components ranging

from sponsorship of a new bike share

program in Wichita to providing online

resources that link northeast Kansas

health care providers with community-

based organizations that can help

Kansans overcome barriers to health care.

The cornerstone of Blue Health Initiatives

is Pathways to a Healthy Kansas, a grant

program that provides 16 communities up

to $500,000 each to remove barriers and

engage communities in ways that enable

healthy eating and tobacco-free, active

living to become a way of life.

Our employees are dedicated to giving back to our Kansas communities.

a safe and healthy workplace for our

employees, but for all Kansans. We

developed the Shield Against Violent

Environments (SAVE) program, and share

the model with interested employers.

We partner with and provide funding

for a number of local and statewide

coalitions dedicated to assisting victims

of domestic violence.

learn healthy eating habits. In all, the

Foundation has funded 1,237 Healthy

Habits for Life grants totaling nearly

$1.2 million as part of its overall giving

of more than $5 million in 11 years.

In 2015, the company began an ambitious

new initiative seeking innovative and

inspiring ways to sustain healthy

In 75 years, we’ve employed more than

14,000 Kansans to serve our members.

These employees have been dedicated

to building a reputation of trust with our

members and contracting providers by

providing outstanding customer service

while quickly and accurately processing

claims; fairly administering benefit plans

and contracts; offering programs, services

and tools to help members improve or

maintain their health; and operating under

the highest ethical standards while being

good stewards of premium dollars.

Celebrating 75 years of service to Kansans

Commitment • Compassion • CommunityAs we have grown from that early start-up

company with just three employees and

eight members to be the leading health

insurer in the state, with 1,600 employees

serving some 925,000 Kansans, we have

not lost sight of those traditions. We

take great pride in our tradition of being

“Kansans serving Kansans” and we look

forward to providing access to a better

quality of life for our neighbors, family and

friends long into the future.

2016 2015

Assets

Cash and Investments $1,249,859,119 $1,270,077,927

Premiums and Other Receivables 155,808,617 138,109,037

Property and Equipment, Net 82,237,112 76,603,173

Investments in Subsidiaries* -0- -0-

Other Assets 181,698,631 197,495,030

Total Assets $1,669,603,479 $1,682,285,167

Liabilities

Claims Incurred and Unpaid $317,497,930 $389,710,291

Premiums Received in Advance 105,546,774 127,483,572

Accounts Payable and Other Liabilities 309,101,386 285,464,554

Total Liabilities 732,146,090 802,658,417

Policyholders’ Reserves 937,457,389 879,626,750

Total Liabilities and Policyholders’ Reserves $1,669,603,479 $1,682,285,167

Blue Cross and Blue Shield of Kansas, Inc.Condensed Consolidated Balance Sheet†

December 31, 2016 and 2015

† As derived from the audited financial statements of Blue Cross and Blue Shield of Kansas, Inc.* Investments in subsidiaries of $121,196,534 and $90,814,125 for 2016 and 2015 respectively, are eliminated for consolidated financial statements.

Andy Corbin, president/CEO, accepts the 2017 Ad Astra Award presented by the Kansas Chamber of Commerce in February 2017

James M. Alley, III, D.D.S., Valley Center Oral and maxillofacial surgeon (retired)

Gregory V. Binns, Hutchinson President/COO, First National Bank of Hutchinson

Leon J. Boor, Abilene Administrator, Memorial Hospital (retired)

Rick C. Jackson, Topeka Executive vice president and chief lending officer, Capitol Federal®

Megan L. Jones, Topeka Founder/president, Jones Advisory Group

James A. Klausman, Topeka President/CEO, Midwest Health, Inc.

Robin R. LacKamp, Wichita Vice president and director of human resources, American State Bancshares, Inc.

Diane L. Lee, CPA, CSEP, chair, Hutchinson Swindoll, Janzen, Hawk and Loyd, LLC

Leonard R. Hernandez, vice chair, New Strawn Chief executive officer, Coffey Health Systems

Andrew C. Corbin, Topeka President/CEO, Blue Cross and Blue Shield of Kansas

Board of Directors*

*as of Dec. 31, 2016

Gary D. Shorman, Hays President/CEO, Eagle Communications, Inc.

Thomas C. Simpson, M.D., Sterling Physician (family practice, retired)

Steve W. Sloan, Pittsburg President/CEO, Midwest Minerals, Inc.

Susan M. Smith, Wichita Senior vice president and chief human relations officer, GLMV Architecture, Inc.

Cathy Mih Taylor, M.D., Chanute Physician (OB/GYN), Neosho County Memorial Hospital

Kenneth W. Winter, Dodge City General manager, Winter Feed Yard

Officers

Members

Statement of Licensee

Blue Cross and Blue Shield of Kansas is licensed by the

Blue Cross Blue Shield Association to offer certain products

and services under the Blue Cross and Blue Shield brand names

within the company’s own geographic service area — all Kansas

counties except Johnson and Wyandotte.

Blue Cross and Blue Shield of Kansas is an independently

licensed company governed by its own board of directors and

is solely responsible for its own debts and other obligations.

Neither the Blue Cross Blue Shield Association nor any other

organization using the Blue Cross and/or Blue Shield brand

names acts as a guarantor of Blue Cross and Blue Shield

of Kansas obligations.

The Blue Cross and Blue Shield system of individual Plans is

not a single entity, but rather an association of independent

licensee companies.

5-111A 06/17 An independent licensee of the Blue Cross Blue Shield Association.

bcbsks.com