Executives say the mega-merger announced last week by Blue Cross and Blue Shield plans in Indiana and Ohio will allow the companies to amass financial reserves and compete with other multistate managed-care operations.
The new organization will be ranked No. 4 of the 68 Blues plans in enrollment and No. 7 in revenues, said Iris Shaffer, spokeswoman for the national Blue Cross and Blue Shield Association.
With 7.7 million enrollees and assets of $4.7 billion, the combined plan formed by Community Mutual Insurance Co., based in Cincinnati, and the Associated Group, based in Indianapolis, would provide healthcare and other insurance, insurance brokerage, and financial services. Executives estimated annual revenues at $6.2 billion.
The Associated Group is the Blue Cross carrier for Indiana and Kentucky. Those two plans merged in June.
"We're now going to take these three states and deliver healthcare on a totally different level," said Dhan Shapurji, vice president of strategic development at Community Mutual, one of Ohio's two Blues insurers. It competes with Cleveland-based Blue Cross and Blue Shield of Ohio.
The venture also should reduce operating costs and give the new company more clout in negotiating lower rates with physicians and hospitals.
"We're not just putting three Blues plans into one. We're changing the dynamics of healthcare by working toward regionality," Mr. Shapurji said. "Employers will be able to move among those states, be transparent and develop across organizational lines."
Dwane Houser, chairman and chief executive officer of Community Mutual, would be chairman of the combined company and would run all health insurance operations. Meanwhile, L. Ben Lytle, chairman, president and CEO of the Associated Group, would be president and CEO of the new firm. He would oversee other operations, including property and casualty insurance.
The merger would require approvals from insurance regulators in Ohio and Indiana.
Executives believe the venture will be completed, unlike a similar proposed merger of three Blues plans in Illinois, Iowa and South Dakota that fell through earlier this year (May 30, p. 12).
Community Mutual has staunchly resisted a merger with Blue Cross and Blue Shield of Ohio. Last year, after years of failed negotiations, the Cleveland plan tried to force a deal by backing bills in the Ohio Legislature that would have mandated a merger.
Community Mutual fought the bills, which failed to win approval. "We felt culture and strategywise, we didn't fit together," said Community Mutual Vice President Brad Buxton. He called the Cleveland plan "more controlling" in some of its strategies and said he disagrees with its tactics of buying and forming joint ventures with hospitals.
The legislative episode further divided the Ohio Blues. A statement issued last week by Blue Cross and Blue Shield of Ohio punctuated the rivalry: "We recognize there will be in the future a limited number of large competing systems. Our disappointment is one competitor will be a Blue Cross plan; however, we accept that reality."