Blue Cross and Blue Shield of Ohio may be the Goliath of Ohio insurers, but it doesn't own its own name.
That was made clear as a federal judge last week gave her OK for the national Blue Cross and Blue Shield Association to terminate the Cleveland-based affiliate from the national Blues system.
Without its Blues license, the plan must change its name and trademarks. Its 1.5 million subscribers will lose the right to participate in national Blues programs, such as portability of coverage.
The loss of the plan's Blues affiliation casts uncertainty on its proposed $299.5 million deal with for-profit giant Columbia/HCA Healthcare Corp. (See related story, p. 12).
The plan filed an appeal with the 6th U.S. Circuit Court of Appeals in Cincinnati. At the plan's request, the court ordered the association to post a $32 million bond in case the license termination is reversed.
The national Blues association called the decision "a victory for the 64.8 million policyholders nationwide who place their trust in the Blue Cross and Blue Shield name." The association said it will be the first time the Blues name and trademark is forcibly removed from a plan for nonfinancial reasons. A West Virginia plan's affiliation was removed in 1990 shortly before it was declared insolvent.
The association had prepared a complex plan to terminate the Ohio Blues by Dec. 5. It solicited Blues plans nationwide to gauge their interest in moving into the Ohio service area and planned to notify healthcare providers that have contracts with Blues affiliates nationwide that the Ohio Blues card is no longer valid.
The association also planned to transfer 25,000 federal employees to Cincinnati-based Anthem Blue Cross and Blue Shield and to assign Anthem the task of processing Blues claims incurred by the state.
The removal of the Cleveland-based plan from the Blues system could be a windfall for Anthem, which has moved into northeast Ohio in recent years, garnering 298,000 subscribers in the Akron, Canton and Cleveland markets. The termination is expected to take four weeks, said association spokeswoman Iris Shaffer. "We're looking for this Cleveland company's cooperation, and hoping that we can work together with them on a smooth transition," she said.
U.S. District Judge Lesley Brooks Wells in Cleveland said it's unlikely the plan would prevail if it proceeds with its lawsuit to stay in the Blues association. She said the plan's license agreement probably terminated automatically in September as the result of a lawsuit filed by Ohio Attorney General Betty Montgomery, which requested a trustee be appointed to oversee the plan's assets.
Wells said the plan's continued use of the name and trademark is likely to confuse consumers and infringe on the rights of the association, which owns them.
It was unclear how the termination will affect the plan's agreement to sell most of its assets to Nashville, Tenn.-based Columbia. Last week, the insurer said it was premature to consider the impact of the termination on the agreement.
That contradicted the testimony of the Ohio plan's chief counsel Kenneth Seminatore last month that losing the license would likely kill the deal.
The sale agreement requires the Blues to pay Columbia $50 million if it cannot transfer the Blues license. That would detract from the $299.5 million purchase price, which consumer groups and some policyholders have claimed is already too low.
A Columbia spokesman said the company was studying the matter of the license termination.
In court last month, Columbia and Ohio Blues officials stressed the value of the Blues license. John Burry, the plan's chief executive officer, testified that Columbia's research showed the Blues' brand recognition and reputation is second only to Coca-Cola in the world, according to court documents. The association's own surveys show the Blues marks lead the market in brand strength and enjoy 99% awareness among consumers, according to court records.
However, a Columbia official also testified last month that the company was considering alternative names for the plan that did not include either "Columbia" or "Blue."
The transaction is still under review by the Ohio Department of Insurance, which has yet to hold public hearings.