Two Blues plans serving Maryland and the District of Columbia market last week announced plans to merge operations under a new holding company.
The combination of Blue Cross and Blue Shield of Maryland and Blue Cross and Blue Shield of the National Capital Area would create an organization with more than $3 billion in annual revenues, a work force of 5,000 and enrollment of more than 2 million.
That enrollment includes more than a half million government workers insured by the Blues as part of the Federal Employees Health Benefits Program.
The plans characterize the transaction, which is pending a formal definitive agreement, as a consolidation for efficiency and geographic coverage but not technically a merger.
The two plans will be subsidiaries of a holding company governed by a selection of directors from the existing boards.
William Jews, 44, president and chief executive officer of the Maryland plan, will assume those positions with the new holding company. Larry Glasscock, 48, president and CEO of the Washington-area plan, will become chief operating officer of the new company.
Both executives came aboard in 1993 following highly publicized congressional hearings in which the Maryland and National Capital Area plans came under fire for lavish spending and other questionable financial management during a period of mounting losses.
Among expenses incurred by the Maryland plan, according to subpoenaed documents, were a four-year lease on a private suite at Baltimore's Oriole Park at Camden Yards and 64 all-expense-paid trips to the 1988 Olympics.
Meanwhile, the Washington-area plan suffered losses in financial reserves while executives took flights on the supersonic Concord to oversee foreign subsidiaries.
But as of the end of 1995, the companies were profitable and gaining new business. The Maryland plan reported a statutory surplus of $100 million and net income of $42 million, while the Washington plan recorded a surplus of $198 million and net income of $44.3 million. In 1996, the two plans added a combined 80,000 enrollees to their rolls.
"Merging the operations of these two contiguous Blue Cross/ Blue Shield plans is a logical business decision that will better serve our customers and allow us to operate more effectively in the Baltimore/Washington metropolitan region," Glasscock said.
Last year the two plans took the first step toward consolidating operations by agreeing to jointly market a Medicare risk product and jointly administer claims of large regional and national employer accounts.