Pictures of Coventry Healthcare of Iowa employees beam down at motorists from billboards strategically placed around the state as the company inches its way into Iowans’ minds.

Coventry bought the managed-care division of Principal Healthcare, a unit of Principal Financial Group Inc., in 1998. For a few years, the company operated under the Principal name while the wholly owned subsidiary of Bethesda-based Coventry Healthcare Inc. modified contracts with health-care providers and built name recognition among insurance brokers. In 2000, it changed its name to Coventry.

Since then, the company’s strength in the Iowa market has continued to grow. It is the second-largest health plan in Iowa, according to company President and Chief Executive Michael W. Teachout, who estimates the plan has 77,000 HMO members in the state and 30,000 PPO members.

“We’re a far distance from the Wellmarks of the world,” he said. “But we are backed by a company which process claims on 4.5 million members nationwide.”

Wellmark Blue Cross and Blue Shield of Iowa provides health insurance and related products to more than 1.5 million people in Iowa. As a member of the Blue Cross Blue Shield Association, Wellmark is part of a national network of 41 plans that insure nearly 88.3 million people, or more than 30 percent of all Americans.

Though Coventry cannot match Wellmark’s customer numbers, Frank Accurso, vice president of sales, says the insurer has some factors in its favor. He says the company processes 65 percent of claims electronically, which increases accuracy and speed. He says Coventry’s employees are another strength.

“Because we’re a smaller organization in Iowa, we only have 75 employees, but I believe we actually touch our customers’ lives better than anyone else,” Accurso said. “Our tag line is ‘powered by people.’ That means being closer to the customer in sales and marketing, health services and customer service.”

Between the spring of 2002 and the spring of 2003, health insurance premiums for American employees rose 13.9 percent, according to the Kaiser Family Foundation’s Employer Health Benefits 2003 Annual Survey. It was the third consecutive year of double-digit premium increases and the largest hike since 1990. The survey of 2,808 public and private employers found that many employers plan to charge their workers more for health insurance benefits over the next year, and two of every three employers are looking for alternative insurance arrangements in an effort to reduce costs.

“A challenge of operating in this state is comparing to the dominant payer,” Teachout said. “To expand your network of (health-care) providers, you have to [pay them] rates equal to or competitive with the dominant payer. Some providers are willing to contract at competitive rates because they want to see competition. Employers want to see competition. Consumers want choice. The market has consolidated somewhat in 2004, and we are fast becoming one of the last viable options for health insurance for employers.”

Like most insurance executives, Coventry’s leaders say they want to cut out the “waste in health care.” When a doctor wants to perform a procedure, the insurance company makes sure it meets standards of care and certain criteria before it takes place.

Teachout gave the example of tests suggested by a doctor. In one case, the doctor might suggest a PET scan, which costs $2,350, when an $850 MRI would suffice. Coventry is also introducing a new product in the second half of 2004 to increase customer awareness of health-care costs, health savings accounts. The more common health reimbursement accounts allow employers and employees to contribute to a fund to offset insurance costs, but any money not used by the end of the year is forfeited. In an HSA, if an employee doesn’t incur enough medical expenses to exhaust his or her account, the remaining money carries over to the next year.

“This allows employees to make decisions in their health-care spending,” Accurso said. “It makes a difference when they’ve got their own skin in the game.”