Highmark deal with Blue wins Delaware OK [Pittsburgh Post-Gazette]

Dec. 31--Delaware's state insurance commissioner has approved the proposed "affiliation" between Pittsburgh health insurer Highmark Inc. and the much smaller Blue Cross Blue Shield of Delaware.

Commissioner Karen Weldin Stewart, who had the ultimate decision on the deal, announced her approval at a news conference in Delaware Friday.

In endorsing the deal, which was first publicly proposed in summer 2010, Ms. Stewart said the arrangement met a variety of conditions that her department imposed, including a $42 million cap on "integration" costs and a number of safeguards that protect the smaller company, which will continue to be headquartered in Delaware.

"With these protections, I find that the affiliation should go forward," Ms. Stewart said in a release that followed the news conference. "I am confident that this affiliation will prove to be in the best interests of Blue Cross Blue Shield of Delaware and its subscribers."

BCBSD is Delaware's largest health insurance carrier, with more than 300,000 customers. Highmark isn't acquiring BCBSD so much as it is managing it from afar, in much the same way that it operates "controlled affiliate" Highmark Blue Cross Blue Shield West Virginia, formerly Mountain State Blue Cross Blue Shield.

BCBSD says the affiliation is necessary to help it reduce administrative overhead and improve its technology by tapping into Highmark's processing systems. It also has said that it feared smaller, regional insurers would become less competitive as federal health care reform rules take effect in the coming years.

On Highmark's end, the deal makes sense because it gets to extend it brand geographically and spread its own fixed costs among hundreds of thousands of new policyholders.

As part of the deal, the Delaware insurer will also get a new name -- Highmark Blue Cross Blue Shield Delaware Inc.

The deal is not yet final: "In the coming months, we will complete the activities needed to make this affiliation a reality so that Delawareans can begin to enjoy the numerous benefits of this affiliation," the two companies said in statement issued Friday.

The CEOs of the two companies, Timothy Constantine of BCBSD and Highmark'sKen Melani, said the deal was good for Delaware's health insurance customers.

"This affiliation will provide the resources for BCBSD to deliver enhanced products and technology to the health insurance marketplace throughout the state, while retaining and strengthening local relationships with customers, hospitals, doctors, other providers and the community as a whole," Dr. Melani said in a statement.

Bill Toland: [email protected] or 412-263-2625.

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