Executives said a proposed mega-merger of Blues plans in three Midwest states has fallen apart amid a struggle over corporate structure and style.
Blue Cross and Blue Shield of Illinois and Blue Cross and Blue Shield of Iowa said they won't merge into what would have been the second-largest Blues organization in the nation. Iowa's Blues also include operations of Blue Cross of South Dakota.
"Their interest is not in pursuing a merger due to differences in the corporate culture, structure and style of our respective organizations-and we agree," said Robert D. Ray, Iowa Blues president and chief executive officer, of the Illinois plan's decision to pull away from the table.
Dennis Culloton, a spokesman for the Illinois Blues, wouldn't elaborate on the breakup or reports that Illinois executives were uncomfortable with the new corporation's headquarters being in Des Moines, Iowa.
Despite the collapse of the merger, Blues executives said the plans would explore joint ventures.
Preliminary plans had called for Mr. Ray, a former longtime Iowa governor, to be president and CEO of the new parent company, while Illinois Blues CEO Raymond McCaskey would have been executive vice president.
The merged organization would have been the Blues' second largest in reserves with $1 billion. It would have been third in revenues totaling $4.6 billion and would have had 3.6 million beneficiaries.
The merger would have allowed the Blues to amass financial reserves and help it compete in a market dominated by large insurers with multistate managed-care operations.
"While I wish things had worked out differently, I am also pleased that these differences were discovered before tying the knot," Mr. Ray said. "Nevertheless, we will be considering ways we might benefit from each other's strengths and capabilities through other forms of alliance and joint venture."
The merger proposal was announced a year ago, and preliminary plans called for the new corporation to be organized under Illinois law and regulated by the Illinois Insurance Department. The two companies would have retained their individual operations under a single board of directors.