Pittsburgh health insurer Highmark closed on a deal for Blue Cross of Northeastern Pennsylvania, expanding its market and its size.
Pennsylvania insurance regulators approved the deal, first announced in February 2014. The acquisition swiftly closed on Monday.
With the acquisition, Highmark, the dominant health insurer in Pittsburgh's hypercompetitive market, adds another 545,000 members across 13 counties. Highmark already covered 4.7 million people across Pennsylvania.
The deal gives Highmark more heft and geographic diversity in Pennsylvania's health insurance market as it battles for market share with UPMC and national insurers in Pittsburgh. Highmark and UPMC have roiled relationships between employers, regulators and politicians as the rivals have fought for customers. Highmark owns the Allegheny Health Network, which competes with UPMC for patients. UPMC owns a health plan that competes with Highmark for enrollees.
Under the term of the deal, Highmark will finance a newly created charity with up to $90 million. The agreement also included the pledge to maintain for four years a local advisory board for Blue Cross of Northeastern Pennsylvania and local operations.
Highmark previously owned a stake in Blue Cross of Northeastern Pennsylvania subsidiary health plans, said Aaron Bilger, Highmark spokesman.
“This merger is a natural progression of the successful business relationship that Highmark and BCNEPA have maintained for decades to best serve the health care needs of the residents of northeastern and north central Pennsylvania,” Deborah Rice-Johnson, president of the Highmark health plan, said in a statement.
In seeking the merger, Blue Cross of Northeastern Pennsylvania said it suffered a drop in fully insured business, heightened hospital consolidation and more pressure to market low-margin health plans in response to the Affordable Care Act. The health plan's membership dropped 20% since 2007.
“This merger will allow us to better address the challenges of a dynamic and continually changing health insurance market,” Denise Cesare, president and chief executive officer of the newly acquired health plan, said in a news release.