Pennsylvanias two dominant Blue Cross and Blue Shield plans said last week that two key federal agencies had given them the green light to proceed with merger plans, but the reaction at the state level portended caution lights ahead.
The Justice Department informed Independence Blue Cross in Philadelphia and Highmark in Pittsburgh that there were no federal antitrust concerns in their proposed consolidation, while the Federal Trade Commission similarly concluded its review. The Justice Departments decision in particular marked a significant milestone in the regulatory review of the controversial consolidation, Independence Blue Cross officials said in a written statement.
Combined, the two insurers would be the nations third-largest with approximately 8 million members and revenue of nearly $22 billion. In 2006, Highmark posted profits of $398.3 million while IBC earned $235.6 million, according to their respective annual reports.
The two plans are now waiting on state approval, which may not come as easily. The Pennsylvania Insurance Department recently announced a public comment period that would end no sooner than July 11, according to IBC. Highmark officials said in a written statement, The Justice Departments clearance confirms our position that the proposed combination of Highmark and IBC will have no adverse effects on competition in Pennsylvania.
In response, the Hospital & Healthsystem Association of Pennsylvania urged a thorough state review, saying the faster-than-expected approval of a transaction of this magnitude by the FTC and DOJ does not answer the many questions that have been raised about its implications for hospitals, patients and communities. We will continue our push for an open and transparent process by all parties with regard to all aspects of the merger, said Carolyn Scanlan, HAPs president and chief executive officer, in a written statement.
Gov. Edward Rendell also cautioned in a written statement that the federal agencies did not approve the merger, that they merely said they could not find any federal antitrust or competitive concerns, terminating the 30-day waiting period. He repeated his call to the state Legislature to swiftly enact clean legislation that would give the state insurance department greater legal authority to review deals of this type.
Under current Pennsylvania law, Blues Plans and fraternal benefit societies are exempted from the standards of review for typical insurance company mergers or consolidations, Rendell noted.