Blue Cross Blue Shield Plans Consider Consolidation Amid Tightening Managed-Care Market

Main Category: Health Insurance / Medical Insurance
Article Date: 26 Aug 2008 - 10:00 PDT

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Some Blue Cross Blue Shield not-for-profit organizations are considering either merging or converting to for-profit status to help them compete with larger insurers in an "increasingly concentrated managed-care industry," the Wall Street Journal reports. These companies, as well as smaller health insurers, "are finding it harder to compete against larger players for many reasons, including the need for economies of scale and greater investments in expensive technologies and tools to comply with laws" or serve members in consumer-directed health plans, according to the Journal.

New Jersey's Horizon BCBS recently filed an application to become a for-profit company, and other not-for-profit BCBS plans are expected to do the same in the next few years, according to University of the Sciences in Philadelphia health policy professor Robert Field. In addition, the two largest not-for-profit BCBS plans in Pennsylvania, Highmark and Independence BCBS, are seeking approval for a proposed merger. The merger does not include a for-profit conversion, but critics expect the companies to seek the status change eventually.

WellPoint, the parent company of the nation's 14 for-profit BCBS plans, is considered a likely purchaser of the plans that convert, the Journal reports. "Very clearly, this industry is going to continue to undergo consolidation," WellPoint spokesperson Michael Kleinman said, adding, "It's tough for smaller plans to be able to make the investments to keep up with" services offered by larger insures, such as WellPoint's cost and quality comparison data on providers in several geographic areas.

Field said "most of the low-hanging fruit" among independent BCBS plans was acquired by larger firms in the 1990s and early 2000s, adding, "I think pressure continues on those that didn't merge at that point." Field said he expects "that there will be some more of those that have remained independent merging or getting swallowed up in one way or another." He noted that Humana also is a likely purchaser of BCBS plans that might convert to for-profit status (Wisenberg Brin, Wall Street Journal, 8/25).

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