What happened when HCSC gobbled up Blue Cross plans in other states? [The Montana Standard, Butte]

By Mike Dennison, The Montana Standard, Butte
McClatchy-Tribune Information Services

Jan. 13--HELENA -- Ten years ago, the Illinois-based health insurance giant planning to buy Montana'sBlue Cross plan did the same in New Mexico, and that state's top insurance official says things have turned out fairly well there for Blue Cross.

"They've done a good job of keeping their customer base in New Mexico," says John Franchini, superintendent of insurance in New Mexico. "They've held their own."

And in Oklahoma, where Health Care Service Corp. bought that state's Blue Cross plan in 2005, it has expanded its business substantially.

Blue Cross Blue Shield of Oklahoma went from about 518,000 customers in 2005 to 668,000 customers as of December 2011, according to the Oklahoma Insurance Department, and nearly doubled its premium revenue from $956 million to $1.8 billion.

HCSC, headquartered in Chicago, has agreed to buy Blue Cross and Blue Shield of Montana, making it part of the company's "coalition" of Blue Cross plans in Illinois, Texas, New Mexico and Oklahoma.

Montana's attorney general and insurance commissioner are reviewing the proposed merger and must decide whether it's in the public interest. Blue Cross in Montana has about 270,000 customers; HCSC has 13 million customers.

New Mexico'sBlue Cross plan had about 400,000 customers when HCSC took over 10 years ago and hasn't changed that much, Franchini said.

It's still the biggest insurer in New Mexico, but faces strong competition from two health plans owned by hospital organizations, he said. Blue Cross has to arrange provider contracts with doctors and hospitals independent from its competitors, he said.

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He said HCSC also opened a service center in New Mexico that employs 500 people.

While Franchini complimented Blue Cross New Mexico's work under HCSC, he said having a new, out-of-state corporation as owner changes the regulatory relationship with the company.

"It's just not going to be as familiar and as simple as it was before," he said. "It's a new corporate master, and it's a very big corporate master."

Oklahoma insurance officials declined to offer an opinion on how HCSC's acquisition of Blue Cross Oklahoma had affected regulation, insurance markets or health care services in the state.

HCSC officials say Blue Cross Montana will have an "affiliate board" of directors in the state, has invited current board members to be on that board, and that one of Blue Cross Montana's current board members will serve on the HCSC board.

The Illinois company also says Blue Cross Montana staff will negotiate with health care providers just as they do today, that the Montana management will remain in place, and that both companies will work toward expanding the availability of health care and controlling its cost.

HCSC officials declined to provide salary information on top Blue Cross executives in New Mexico or Oklahoma, or how those salaries may have changed since the mergers.

In New Mexico, the merger also led to creation of a nonprofit foundation to support health care initiatives. Montana law requires creation of a similar foundation, funded by proceeds of the sale of Blue Cross's assets.

Franchini said state officials should maintain close oversight over the foundation and how it spends its money, noting that the New Mexico foundation has been less active in recent years.

"I wouldn't let it be a free-wheeling, independent organization," he said. "That money should be spent right."


(c)2013 The Montana Standard (Butte, Mont.)

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Distributed by MCT Information Services



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