Faced with impending rejection by state regulators, two of Pennsylvania's largest Blues insurers have called off their long-standing plan to merge.
Highmark, based in Pittsburgh, and Independence Blue Cross, based in Philadelphia, said they withdrew their application to the state Insurance Department as it became clear that the department would not approve the transaction.
State Insurance Commissioner Joel Ario planned to issue an order denying the merger on Jan. 27, according to the department.
The two companies submitted their state applications to merge in April 2007 to create the third-largest Blues plan in the nation, with about 8 million members combined. The deal was twice approved by the U.S. Justice Department and 10 hearings were held. The merger was extremely controversial, drawing hundreds of public comments. Hospitals in the state were split over the issue.
In the end, the sticking point was about branding, according to the two insurers.
"To address its concern about the combination's impact on competition, the Pennsylvania Insurance Department told us that we would have to relinquish the use of either the Blue Cross brand or the Blue Shield brand," Kenneth Melani, president and chief executive officer of Highmark, and Joseph Frick, Independence Blue Cross' president and CEO, said in a joint statement. "Throughout the review process, we have stated repeatedly that we would not give up one of our brands."
The withdrawn application "smoothes the process and allows all parties to focus on the challenges we all face in addressing the larger healthcare crisis," Ario said in a written statement.