Nonprofit Blues company seeks to acquire Oklahoma plan

A Chicago-based company that owns Blue Cross Blue Shield plans in Illinois, Texas and New Mexico said in December 2004 that it's taking steps to eventually merge with Blue Cross Blue Shield of Oklahoma.

Health Care Service Corp. said it had signed a letter of intent to engage in due diligence discussions with the Tulsa-based Blues plan, which, like itself, is a nonprofit mutual company. That would pave the way for a "strategic alliance" that in turn would become an official corporate marriage with the Oklahoma plan as a subsidiary, the company said.

"You've got Anthem and WellPoint actively bringing together for-profit companies, and we think our role is kind of to provide a similar role for nonprofits," said Bob Kieckhefer, spokesman for HCSC.

Indiana-based Anthem and California-based WellPoint Health Networks late last year combined to become WellPoint, the nation's leading private health insurer, based in Indianapolis. The companies operated for-profit Blues plans.

If the merger is accomplished, physicians in the Oklahoma network probably will notice little or no changes, Kieckhefer said.

The Oklahoma State Medical Assn. is still studying the planned merger and does not have an official position on it yet, said Mukesh T. Parekh, MD, the group's president and an ob-gyn in Oklahoma City. The association is interested in knowing if any changes in physician contracts that might occur under HCSC would be beneficial or harmful, he said.

More mergers with other nonprofit Blues plans could be ahead for HCSC, Kieckhefer said. The proposed merger requires the approval of regulators in Illinois and Oklahoma. HCSC hopes to complete it by the end of this year, he said.

HCSC merged with the Texas Blues in 1998 and bought the assets of the New Mexico plan in 2001. The company covers some 9.5 million patients through its three subsidiaries. The company offers health, vision, dental, mental health and prescription drug coverage, as well as life insurance and annuity products. It also owns The Health Information Network, a medical electronic clearinghouse.

The Oklahoma plan has about 834,000 members.

The Chicago company would strengthen the Oklahoma plan by reducing its costs through economies of scale, helping to increase its financial reserves, improving customer service and developing its technological infrastructure, Kieckhefer said.

Several of the Oklahoma plan's competitors are large, national, for-profit payers that have access to more capital, said Linda Sponsler, spokesperson for Blue Cross Blue Shield of Oklahoma. In addition, the Oklahoma Blues finds a merger with HCSC appealing because the Chicago company has a record of allowing its constituent plans to be administered locally, she said.

Neither plan has any interest in converting to a for-profit, investor-owned company, Sponsler and Kieckhefer each said.