Fast-growing Anthem, which is building regional insurance strongholds in New England and the Rocky Mountain states, last week said it has agreed to acquire Blue Cross and Blue Shield of Maine for $120 million.
The cash-strapped Maine Blues has 380,000 enrollees, and officials admit it has had trouble holding its own in recent years against stiff competition from national powerhouses Aetna U.S. Healthcare and Cigna HealthCare.
As much as $100 million of the purchase price would be used to fund a new charitable foundation for Maine residents, which state law requires when a not-for-profit organization is acquired by a for-profit. The remainder would retire the Maine health plan's outstanding debts.
But the proposed deal already has provoked objections from Consumers for Affordable Health Care, a consumer group in the state. The group is concerned about the deal's valuation and what it perceives as Anthem's hard-edged style. Those concerns mirror issues that have been raised in other states where Indianapolis-based Anthem has done deals.
Anthem also owns Blue Cross and Blue Shield of Connecticut and is acquiring the New Hampshire Blues, so a deal in Maine would augment its growing New England presence. Anthem is also eying Blue Cross and Blue Shield of Rhode Island (April 26, p. 12).
In Maine, the state bureau of insurance must review and approve the affiliation agreement, and the state attorney general's office must review and approve the creation of a charitable foundation.
The two companies expect the transaction to close by early next year, pending regulatory approval.
The Maine Blues has sought an infusion of capital for about a year, and officials at the South Portland-based health plan say an affiliation with an organization with deeper capital resources is necessary to secure its future. The plan lost $4.1 million on consolidated revenues of $561.2 million in 1998, after losing $47.1 million on $617.6 million in revenues the previous year.
The health plan has about 100,000 fewer enrollees than it had three years ago.
In contrast, Anthem posted net income of $172 million on revenues of $5.9 billion last year.
Consumers for Affordable Health Care argued that Maine residents weren't adequately informed about bidding and selection. "To keep the public in the dark about the bidders and the terms of the proposed sale is a travesty," said Joseph Ditre, the group's executive director.
However, Keith Vangeison, president and chief executive officer of the Maine plan, insisted that Anthem submitted a better proposal than a number of other Blues plans. An affiliation with Anthem would allow the Maine Blues "to match the strength of our competitors" while retaining its Blues name and traditions, he said.