Blues merger faces opposition in Pennsylvania Legislature

The state Senate's banking and insurance committee votes 10 to 4 to recommend the insurance commissioner block a merger of Highmark and Independence Blue Cross.

By Emily Berry — Posted Jan. 5, 2009

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Pennsylvania Insurance Commissioner Joel Ario has the final word for the merger of the state's two largest Blues plans. As he deliberates, he will have input from state legislators, including a panel of state senators who have asked him to block the consolidation.

A merger of Highmark, based in Pittsburgh, and Independence Blue Cross, based in Philadelphia, would create the third-largest Blues plan in the country by membership, with an estimated 8 million members in Pennsylvania, or about 70% of the state's residents.

Following hearings that included testimony from the American Medical Association, the state Senate's banking and insurance committee voted 10 to 4 to send two recommendations to Ario -- one detailing why he should deny the Blues' merger, the other listing conditions that should be placed on the deal in case he does allow it to go forward. Ario is scheduled to decide on the merger at the earliest by the end of January. The deal was first announced in 2007, and already has U.S. Dept. of Justice approval.

Among the reasons the Senate committee asked Ario first to reject the merger, it noted that "given the market power and vast footprint that the merged plan will have, it is unlikely hospitals or physicians who serve patients could refuse the terms dictated by the plan."

The conditions the committee set forth in case the deal were to win approval included some suggested by the Pennsylvania Medical Society in a letter to the committee chair from PMS President Daniel J. Glunk, MD, an internist from Williamsport, Pa.

Among those were: prohibiting the combined company from asking doctors to sign exclusive or "most-favored-nation" contracts; barring it from becoming a for-profit company; and establishing an arbitration process under which physicians' grievances against a combined Highmark-Independence Blue Cross can be heard.

The four senators in the minority sent a letter outlining the benefits they believe the merger would bring to the state, including the promised $1 billion economic impact.

The state's House insurance committee did not make a direct plea to Ario to approve or deny the deal, but the committee's chair and its senior Republican sent a joint letter with five recommendations for conditions should the merger be approved, including measures to protect physicians from unfair contracting practices.

In a statement in response to the legislators' letters, Highmark noted that the two plans believe the deal would help the state's economy.

"These benefits are especially important now that Pennsylvania's economy is feeling the impact of the global economic downturn," the statement said.

Ario said in a statement that "legislative comments merit special attention since legislators represent diverse constituencies and therefore bring broad and well-informed perspectives to the table."

Under state law, the earliest Ario can announce his decision is Jan. 27, 105 days after the public comment period concluded on Oct. 14, 2008.

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