Blue Cross and Blue Shield plans around the country continue to wrestle with merger-related issues.
Blue Cross & Blue Shield of Connecticut, North Haven, Conn., recently won policyholder approval to proceed with a merger with Anthem Inc., a large, expansion-minded Indianapolis Blues licensee.
Blue Cross and Blue Shield of Kansas, Topeka, Kan., and Blue Cross and Blue Shield of Kansas City, Kansas City, Mo., announced they will postpone their merger plans while Kansas City Blue determines whether it is a nonprofit mutual owned by its policyholders or a charity owned by the people of Missouri.
Meanwhile, consumer activists are asking whether Blue Cross and Blue Shield of Nevada, Reno, Nev., a nonprofit health service corporation, paid enough to compensate the people of Nevada when it permitted itself to be acquired by Blue Cross and Blue Shield of Colorado, Denver, Colo., through a merger.
Blues plan executives involved with the three deals face similar questions about the possibility that they might control charitable assets and the proper way to dispose of charitable assets before engaging in mergers or conversions to for-profit status. Most states say charities hold their assets in trust for the good of the people of the state.
Connecticut Blue reported its policyholders voted 44,824-3,281 in favor of the Anthem deal. There were 2,046 abstentions. Anthem policyholders also approved the deal.
John Croweak, Connecticut Blue chairman, called the vote a signal that policyholders have concluded the merger will be a positive step for the plan.
He also hailed the vote as a victory against consumer activists, union leaders and others who have argued the company should be required to transfer some or all of its assets to charity before it merges with Anthem.
Connecticut Blue, a plan with 850,000 members, announced the Anthem deal in October 1996. It became a for-profit mutual in 1984. Before that, it operated as a nonprofit.
The Connecticut Conference of Municipalities and state Comptroller Nancy Wyman are working with consumer activists to slow the merger and persuade state insurance regulators to give the charitable assets issue close attention.
Mr. Croweak said the assets exist for the benefit of the policyholders. 'They should not be confiscated to meet the unspecified charitable needs of others,' Mr. Croweak said. 'Those accumulated premiums serve as a reserve fund used to pay our policyholders' health claims.'
Connecticut insurance officials declined to comment on Connecticut Blue's merger application, but they have requested more information from the plan supporting its argument that it has no charitable assets. Officials also asked for information about whether Anthem was making any special payments to senior Connecticut Blue executives that might have influenced their decision to go ahead with the deal.
Kansas City Blue, a plan with 725,000 members, has been talking to Kansas Blue about the possibility of a merger for 15 years. The companies announced an agreement in November 1996 to make a business combination a reality. (See NU, Nov. 18, 1996.)
But Missouri officials slowed talks by suggesting Kansas City Blue might be a charity. Kansas City Blue recently filed a lawsuit in Cole County Circuit Court asking the judge to decide whether it is a charity or a mutual.
If the court rules against Kansas City Blue, it might have to make a large payment to charity or the state government before it could complete the Kansas Blue merger.
'The legal environment in both states is extremely complex, and some of these issues will take many months--perhaps even years--to resolve,' Richard Krecker, Kansas City Blue president, said in a statement. 'We felt that because of the length of time it would take to complete this merger, and to avoid employee burnout, it is in the best interest of both companies to end discussions at the present time.'
Kansas Insurance Commissioner Kathleen Sebelius said she had heard 'cultural differences' between the plans might be partly responsible for the interruption in merger discussions.
She questioned why Kansas City Blue took so long to get an official ruling on its status. 'I would have thought this clarification would have been step one,' Ms. Sebelius said.
Nevada Blue has been trying to merge its operations into those of Colorado Blue for more than a decade. Colorado Blue began managing it through a holding company, Rocky Mountain Health Care Corp., in 1987. (See NU, Jan. 20.)
Regulators finally gave the plans permission to consummate a merger last year. Now that the deed is done, a coalition of consumer activists, Nevadans for Blue Cross and Blue Shield Conversion Equity, is asking whether the Nevada plans should have compensated the people of Nevada before transferring control of its assets to Colorado Blue, a company that has applied for permission to convert to for-profit status.
Before the merger, Nevada Blue was a nonprofit plan with 44,000 members. Executives denied that the plan held any charitable assets, but the plan contributed $1.5 million, or $34 per member, to a Nevada foundation as a good will gesture.
The conversion equity coalition issued a statement saying Nevada officials should have focused more public attention on the Nevada Blue/Colorado Blue deal and done a better of job of determining whether the deal involved the transfer of any charitable assets.
Colorado Blue spokesman Carl Miller said the equity Coalition is ignoring Nevada Blue's small size and big debt. Colorado Blue rejects the idea that Nevada Blue held charitable assets. But, even if state regulators had decided the plan was a charity, it might not have been worth much, Mr. Miller said.
The plan boards found that Nevada Blue was worth about $11 million, roughly the same amount that it owed Colorado Blue, Mr. Miller said.
'It's a teeny little company,' Mr. Miller said. 'Traditionally, it administered the Medicaid program. We got them into the commercial market.'
Colorado Blue is acquiring Nevada Blue partly so that it can invest the capital in the plan needed to make it a stronger player, Mr. Miller said.
