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Blue Cross Montana files documents on merger, will create $100 million-plus foundation

2012-11-16T15:25:00Z 2012-11-16T23:54:19Z Blue Cross Montana files documents on merger, will create $100 million-plus foundationBy MIKE DENNISON IR State Bureau Helena Independent Record
November 16, 2012 3:25 pm  • 

Blue Cross and Blue Shield of Montana, the state’s largest private health insurer, asked state regulators Friday to approve its proposed merger with an Illinois-based nonprofit insurance giant — a move that also would create a $100 million-plus health charity in Montana.

The documents, filed with the state auditor and attorney general, outline how Blue Cross Montana’s assets will be transferred to Health Care Service Corp. (HCSC), the fourth-largest health insurer in the nation.

Mike Frank, president and chief executive of Blue Cross Montana, said the companies are “excited” to combine forces to offer better health-insurance products and services and also fund “a significant charitable contribution to help improve health care for Montanans who need it the most.”

State Auditor Monica Lindeen, who is Montana’s insurance commissioner, and the state attorney general must determine whether the merger is in the public interest.

Blue Cross officials said they hope the transaction will be approved by next June.

HCSC plans to pay $17.6 million for acquiring Blue Cross Montana’s business — money that will go toward a new foundation to “improve the quality, availability and awareness of health-care programs and services for Montana.”

Blue Cross also will transfer additional money to the foundation, from the sale or transfer of “public assets” from Blue Cross, such as the Montana company’s reserves, any remaining subsidiaries and some of its buildings. Those proceeds are expected to be more than $100 million, according to documents filed Friday.

The new foundation is required by a 2005 law, approved by the Legislature to ensure that some Blue Cross assets would remain in Montana if the nonprofit, tax-exempt insurer was sold to a for-profit company.

Although Blue Cross is becoming part of a nonprofit firm, Blue Cross agreed in its filing that the law still applies to the transaction.

Blue Cross announced two months ago that it intended to merge with HCSC, an alliance of nonprofit health insurers in Illinois, Texas, New Mexico and Oklahoma. HCSC has more than 13 million customers and had $1.2 billion in net income last year.

Benefits for Blue Cross

Blue Cross said Friday that merging with a large nonprofit will preserve Blue Cross’s longstanding mission and nonprofit status, while giving it access to capital and other services it will need to compete in a dramatically changing health insurance market.

A small, state-based insurer like Blue Cross would be hard-pressed to compete with national giants, which are better able to absorb the costs of higher-risk customers coming into the system because of federal health care reform, and to make needed investment in technology, Blue Cross said in its filing.

Blue Cross will be transferring the business of its 274,000 customers to HCSC, along with assets such as its provider network of 2,000 physicians, all Montana hospitals and 2,800 other health care providers.

Blue Cross is calling the transaction an “alliance” with HCSC, and says it will maintain its name and operate locally with the same local management team, although its employees will become employees of HCSC.

The company also has said it doesn’t expect to lose employees because of the transaction, and may actually increase employment and growth in the future.

“At Blue Cross and Blue Shield of Montana, we put our members, employees and Montanans first,” Frank said. “This alliance means security and peace of mind for our customers for years to come.

“It means we remain locally focused and not-for profit … It means we can become more efficient and keep costs down better than we could otherwise.”

A key element of the deal is creation of the new health care foundation, financed by the sale and other assets not transferred to HCSC.

The foundation will be governed by a board of directors, whose membership has yet to be determined.

Approval process

Lindeen’s office must hold a public hearing on the proposed transaction by the end of next March. A state hearings officer, appointed in consultation with the attorney general, will preside over the hearing and make a recommendation to Lindeen and Tim Fox, the incoming attorney general.

At the invitation of Attorney General Steve Bullock’s staff, Fox — who was elected Nov. 6 as Montana’s next attorney general — attended a state Justice Department meeting Friday on the transaction.

Bullock was elected governor Nov. 6 and will be leaving the attorney general post in January, as he takes over on his new job.

State law outlines how Lindeen and Fox must determine whether the merger is in the public interest.

Requirements include whether the deal will adversely affect access to health care services and health coverage, whether it treats customers fairly, and whether Blue Cross’s “public assets” have been properly valued.

Copyright 2015 Helena Independent Record. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(3) Comments

  1. steeline
    Report Abuse
    steeline - November 17, 2012 11:54 am
    And then there is one. Where are all the choices going? Where is the competition? Obama care will destroy the open market where people can pick and choose who they do business with. Now our choices are being eliminated and all we will get is the BUSINESS IN THE END .
    We absolutely have to take America back.
  2. Montanans for Healthcare Excellence
    Report Abuse
    Montanans for Healthcare Excellence - November 17, 2012 1:03 am
    If you have any questions or concerns about our alliance, we hope you'll visit our website, www.bigskyhealth.org, to learn more about it. We want all Montanans to understand how Blue Cross Blue Shield of Montana is about to get even better — and that's why we've launched a new initiative, Montanans for Healthcare Excellence, focused on helping Montanans learn about the alliance.
  3. skywatcher
    Report Abuse
    skywatcher - November 16, 2012 3:59 pm
    I'm so happy to see my skyrocketing premiums are going to help someone in need thru the health charity...

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