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Last updated: February 19. 2014 11:28PM - 1633 Views
By Bill O’Boyle boboyle@civitasmedia.com



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WILKES-BARRE — Highmark Blue Cross tried to merge with Independence Blue Cross of Philadelphia in 2009, but concerns raised by the Pennsylvania Insurance Department caused the companies to withdraw the plan.


According to news releases issued at the time from Highmark and the department, the proposed deal was abandoned, but there are conflicting explanations as to why.


Joel Ario was state insurance commissioner from 2007 to 2010 and he welcomed the Jan. 21, 2009, decision by Independence Blue Cross and Highmark to withdraw their proposed consolidation.


At the time, Ario praised the insurers as “quality companies with extraordinary track records in serving Pennsylvania consumers” and pledged to work cooperatively with them to pursue the broader health reforms necessary to resolve the health care crisis.


“Bigger is not always better — and in this case, bigger would have been bad for consumers,” Ario said in the news release. “We were prepared to disapprove this transaction because it would have lessened competition and disadvantaged providers to the detriment of the insurance buying public.”


Ario said state consumers were already facing one of the least competitive health insurance marketplaces in the country and the Highmark/IBC consolidation would have made it worse, resulting in fewer consumer choices and weaker provider networks.


“This transaction passed the basic financial and management tests, but it did not satisfy the competition test,” he said.


Ario said the proposed consolidated company would have had a dominant position in the Pennsylvania market with $17 billion in annual premium revenues and a 51 percent market share — an unprecedented level of market power in a single state, more leverage than any other health insurer has in any other single state.


The Insurance Department’s 21-month review was the most extensive review in the agency’s history.


At the same time in 2009, Highmark Inc. and Independence Blue Cross announced they had withdrawn their applications to the state to combine the two companies — a process that began in April 2007.


In a joint statement, Highmark CEO Kenneth R. Melani, M.D., and Independent CEO Joseph A. Frick said:


“In recent days, it became clear to us that despite the well-documented advantages of the consolidation for our customers and our communities, the Insurance Department would not approve the transaction because of its belief that there would be an adverse impact on competition. We fundamentally disagree.


“We have shown that the combination would not lessen competition in our markets. In fact, the U.S. Department of Justice examined the competitive effects of the proposed combination on two separate occasions and cleared the transaction each time,” the statement said.


The joint news release also said the Insurance Department informed them that the two companies would have had to relinquish the use of either the Blue Cross brand or the Blue Shield brand.


“Throughout the review process, we have stated repeatedly that we would not give up one of our brands,” the news release stated. “We concluded that giving up one of our brands would preclude the new company from delivering to our customers, communities, and the Commonwealth the full results we had projected. This is genuinely disappointing.”


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