A mixed bag: brokers try to sort out the possible effects of a proposed merger between Highmark and Independence in Pennsylvania.The proposed merger of Highmark Inc. and Independence Blue Cross has brokers on both sides of the fence as they consider how combining Pennsylvania's two largest health plans would affect them and consumers. Some brokers believe a union would result in administrative efficiencies and additional funding for the state's uninsured, while others fear it would spark decreased competition from having one dominant carrier in the Pennsylvania market. On March 28, the boards of Pittsburgh-based Highmark and Philadelphia-headquartered Independence unanimously voted to merge, which would result in the biggest health insurer in the state and among the largest in the nation. The merger would bring together 4.6 million Highmark policyholders and 3.4 million members of Independence and its affiliates. The new company would control 53% of the state's health insurance market, based on an analysis of 2005 data provided by the Pennsylvania Department of Insurance. The two Blues plans have promised not only that the move would result in $600 million in cost savings, but also that it would provide more than $650 million to support the state's programs for the uninsured and underinsured un·der·in·sure tr.v. un·der·in·sured, un·der·in·sur·ing, un·der·in·sures To insure under a policy that provides inadequate benefits: Be certain that you are not underinsured against catastrophic illness. . Many of the state's doctors and hospitals, however, contend the combination would discourage other health insurers from entering the market, ultimately harming patients and providers. And at a spring U.S. Senate Judiciary Committee The U.S. Senate established the Committee on the Judiciary on December 10, 1816, as one of the original 11 standing committees. It is also one of the most powerful committees in Congress; among its wide range of jurisdictions is investigation of federal judicial nominees and oversight of hearing in Philadelphia, the director of the nonprofit A corporation or an association that conducts business for the benefit of the general public without shareholders and without a profit motive. Nonprofits are also called not-for-profit corporations. Nonprofit corporations are created according to state law. Action Alliance of Senior Citizens called the merger a "mega-corporate reshuffling re·shuf·fle tr.v. re·shuf·fled, re·shuf·fling, re·shuf·fles 1. To shuffle again: reshuffle cards. 2. of the deck chairs on our sinking Titanic Titanic (tītăn`ĭk), British liner that sank on the night of Apr. 14–15, 1912, after crashing into an iceberg in the N Atlantic S of Newfoundland. More than 1,500 lives were lost. health-care system." Both Sides of the Fence Some brokers see the proposed merger as an "optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op opportunity," said Chet Rhoads, executive vice president of HDH HDH Dillingham Airfield (north shore of Oahu near the community of Waialua) HDH HDLC Distant Host HDH Hawaii Department of Health HDH Home Dear Home Group Inc. Henry Loubet, chief strategy officer for Keenan & Associates, believes "it's positive having two major health plan entities with significant market share come together into a well-respected organization that's well known in the marketplace." He said he's hopeful consolidation would result in improved efficiencies, more consistency in serving statewide employers, better cooperation and cost reductions from eliminating duplication. "That will result in an overall lower cost structure benefiting consumers, employers and brokers," he said. "Initially, the two carriers are talking savings that would be realized on the administrative side," agreed Jerry Campanaro, executive vice president and employee benefits manager for the Delaware Valley The Delaware Valley is the name of the metropolitan area centered on the city of Philadelphia in the United States. The region is named for the Delaware River which flows through it. Hub of The NIA NIA National Institute on Aging (NIH) NIA National Indoor Arena (UK) NIA National Intelligence Agency (South Africa and Thailand) NIA National Institute of Accountants Group LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control . "But if there are 8 million insureds with one vendor, the plans will be calling the shots, and I would like to see how that's going to work." Ivy Silver, a principal with The Commonwealth Consulting Group Inc., has additional concerns. "Whenever you have a merger like this, you have significant issues around computer platform integration," she said. "Subsequently, consumers will feel some of the administrative difficulties associated with the merger of two organizations, and there will be some immediate disruptions." She also said neither plan has been very broker-friendly, and she fears the merging of two carriers with similar cultures "won't facilitate a good opportunity for employers who are trying to get maximum information." Loubet disagreed. "Historically, Blues plans have been supportive of working with brokers and consultants, so I don't think there should be great impact in that regard. I think larger firms with more sophisticated administrative and IT systems, through automation and interfaces with large plans, could benefit," he said. Still there's much unknown. Campanaro said brokers have not been briefed yet as to what the proposed merger might mean for them. "We're sitting on the sidelines On the sidelines An investor who decides not to invest due to market uncertainty. on the sidelines Of or relating to investors who, having assessed the market, have decided to avoid committing their funds. now and waiting to be updated," he said. Consumer Crusade Despite an uproar by groups such as the Action Alliance, many brokers are optimistic that the proposed merger is a step in the right direction for consumers. "Both plans independently are very large companies, are profitable and have deep pockets. That allows them to provide much funding for the community and the state's uninsured," said Rhoads. Consumers also would be able to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. each plan's best practices, he said. "For instance, Highmark has some best practices around wellness programs and disease management, and Independence excels in other types of value-added programs." John VanWie, a partner at Travers, O'keefe, believes a merger would give employers the ability to work with one company and have access to multiple offices. "The Blues offer a national network product. That helps brokers, because if they have a New York-based client with offices in Ohio, they can access the best plan in their area because the Blues are the dominant plan in some states." Silver also believes consumers would have more fluidity in the event of a merger. "It may decrease some of the administrative burden in the relationship of having multiple contracts," Silver said. "Hopefully, there may be a unification (programming) unification - The generalisation of pattern matching that is the logic programming equivalent of instantiation in logic. When two terms are to be unified, they are compared. of benefits offered between Pittsburgh and Philadelphia. Even now Highmark has built much of their near future on a PPO PPO abbr. preferred provider organization PPO Managed care Preferred provider organization, see there Infectious disease Pleuropneumonia-like organism, see there [preferred provider organization pre·ferred provider organization n. Abbr. PPO A medical insurance plan in which members receive more coverage if they choose health care providers approved by or affiliated with the plan. ] platform; that's not the case with Independence, which built a program on point-of-service and health maintenance organization products. They have very different product lines." [GRAPHIC OMITTED] Show Me the Money One big question remains: Would there be true cost savings if the companies merge? Highmark and Independence said they expect to generate more than $1 billion in additional resources to provide access to health-care coverage for Pennsylvanians. Independence President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Joseph Frick told attendees at the U.S. Senate Judiciary Committee hearing that savings also would come from business efficiencies such as avoiding duplicate investments in costly technology and administrative requirements, and by consolidating computer systems for claims processing, enrollment, medical management and provider transactions. The combined company is expected to hold administrative fees flat for two years, resulting in direct savings of $300 million to policyholders. But some brokers are skeptical. "Whenever there's a merger--whether it be banks, hospitals, etcetera--the goal is to combine the infrastructure that will ultimately impact administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. because they're such huge bureaucratic bu·reau·crat n. 1. An official of a bureaucracy. 2. An official who is rigidly devoted to the details of administrative procedure. bu organizations. I don't think we'll see that happening immediately. But over time, it will be streamlined, which ultimately affects costs," said HDH Group's Rhoads. Part of Highmark's profitability comes from offshore arrangements, said Silver. "You have to wonder what will be the value to the local community in that circumstance. You already have hospitals facing a difficult time with contract rates. What happens when you have a 70,000-pound elephant sitting in a room, and how will providers be able to negotiate?" Some brokers worry a merger could impact their compensation. "Highmark, for instance, compensates on a per-head basis, so that no changes in premium structures basically will flatten flatten - To remove structural information, especially to filter something with an implicit tree structure into a simple sequence of leaves; also tends to imply mapping to flat ASCII. "This code flattens an expression with parentheses into an equivalent canonical form." the income streams for brokers," said Silver. Highmark said it compensates brokers on a per-head basis for the small employer market. "It's a thought pattern when one plan can call the shots because they're the only game in town," said Van Wie. "If they come up and alter compensation packages, what recourse does a broker have? They can't move to another carrier that will pay them more." However, NIA Group's Campanaro said the plans view brokers as the "lifeline life·line n. 1. a. An anchored line thrown as a support to someone falling or drowning. b. A line shot to a ship in distress. c. A line used to raise and lower deep-sea divers. 2. of the business," and he believes they'll come up with something reasonable. "From what I understand, Highmark pays per application versus IBC IBC International Building Code IBC Iraq Body Count IBC Institutional Biosafety Committee IBC Inflammatory Breast Cancer IBC International Business Company IBC Independence Blue Cross IBC Insurance Bureau of Canada IBC International Broadcasting Convention paying a percentage of premium. The broker community is patiently waiting. IBC is a good company with leadership that recognizes the importance of a broker. I'm sure they will come up with a compensation plan that represents the lifeline to the sale of their products." Rhoads believes some smaller brokers working in community-rated programs with built-in commissions will feel little impact. "I would think that both Blues organizations will want to maintain the integrity of their marketing through brokers," he said. For the middle- to larger markets, he said, brokers will go unscathed because man), have moved away from commissions to fee-based compensation Fee-based compensation Payment to a financial adviser of a set hourly rate, or an agreed-upon percentage of assets under management, for a financial plan. When the plan is implemented, the adviser may also receive commission on some or all of the investment products purchased, . Silver is concerned the proposed merger could reduce the pool of brokers in the state. "Just when there'll be an ever greater need for brokers, you're going to find that brokers will receive less remuneration REMUNERATION. Reward; recompense; salary. Dig. 17, 1, 7. and that could likely decrease the number of brokers." Highmark and Independence don't think brokers have anything to worry about and view them as an integral part of their organizations. Brokers are one of several groups the plans partner with to distribute their products. "Following consolidation, the new company will continue to offer its insurance products through this vital distribution system. The one notable difference is that this unified distribution system will have a broader and deeper portfolio of products and services with which to meet customer requirements," the plans said in a joint statement. Competition Quandary Another big concern is whether a merger would create a monopoly. "Competition is a big deal to a state as large as Pennsylvania," said Silver. "The largeness of these two organizations will significantly limit the ability of other carriers to come into the region and be able to compete in terms of enough lives to cover those lives." Frick assured stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. that competition and choice in the health insurance marketplace wouldn't be compromised. "The plans don't compete and never have.... We have worked closely together for more than 50 years on projects and products. However, Highmark and Independence have virtually no geographic or customer overlap." He noted both organizations have major competitors, including national, publicly traded Aetna and Cigna, Coventry Health Care Coventry Health Care, Inc. (Coventry) (NYSE: CVH) is a managed health care company in the United States. On February 8th of 2007 Coventry agreed to acquire Concentra's Workers Compensation Managed Care Services Businesses. External links
Still, the future remains to be seen. "In the past five years, I don't think we've seen a merger in this market of this magnitude," said Rhoads. "And even if we did, I don't think it would have as many positive outcomes as this one could have." Consolidations among Blues plans nationally is a growing phenomenon, said VanWie. "People don't realize how all the separate Blues plans that have dominated their states are armed with so much cash. Deciding to merge makes them absolute forces in the market. If we were ever moving to any type of single-payer system single-payer system Health reform Social medicine, in which all medical services are paid by a single reimbursement agency. See Canadian plan, Clinton Plan, Managed care, Socialized medicine. , they would be well situated. Blues plans are the only game in town in many states, and they have a monopoly on hospitals." But, almost without fail, he said, "my multi-site employer companies adopt the national Blue Cross network, which is a cooperative of all of [the Blues plans] working together that enables everyone to use their own Blue Cross providers in each state and come under the umbrella of one plan. It appears seamless to clients. "Whenever we see Blue Cross consolidations in the market, there's an emerging pattern that's extremely intelligent," he added. "The Blues entities are dealing with their relative corporations around the country and covering a lot of bases and could become an even more significant force, especially when they sell to each other and dominate the markets." Learn More Highmark Blue Cross and Blue Shield Blue Shield A US not-for-profit health care insurer that is a reimbursement intermediary for physicians. Cf Blue Cross. A.M. Best Company # 64010 Distribution: Captive sales force, brokers, direct Independence Blue Cross A.M. Best Company # 64553 Distribution: Direct sales representatives, brokers, association administrators, consultants, direct For ratings and other financial strength information about these companies, visit www.ambest.com. HIGHMARKS[R] Headquarters: Pittsburgh Founded: Formed in 1996 through the merger of Blue Cross of Western Pennsylvania Western Pennsylvania consists of the western third of the state of Pennsylvania in the United States. Pittsburgh is the largest city in the region, with a metropolitan area of about 2.4 million people, and is the cultural center for Western Pennsylvania. and Pennsylvania Blue Shield Leadership: Dr. Kenneth Melani, President and CEO Members: 4.8 million Core Products: Health insurance and managed health-care products and services 2006 Net Premiums Written: $4.6 billion 2006 Total Revenues: $4.58 billion 2005 Net Income: $132 million Independence Blue Cross Headquarters: Philadelphia Founded: Incorporated on Aug. 11, 1938 Leadership: Joseph A. Frick, President and CEO Members: 2.6 million members locally and 3.4 million overall Core Products: Health insurance and products and services such as managed care, traditional indemnity, Medicare and Medicaid Medicare and Medicaid U.S. government programs in effect since 1966. Medicare covers most people 65 or older and those with long-term disabilities. Part A, a hospital insurance plan, also pays for home health visits and hospice care. 2005 Net Premiums Written: $368.9 million 2005 Total Revenues: $389.2 million 2005 Net Income: $23.3 million * 2006 numbers were not updated as of print time. |
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