Affordable Care Act seen as major driver

Last updated: February 19. 2014 11:28PM - 3095 Views
By Bill O’Boyle boboyle@civitasmedia.com

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• To read the entire merger filing before the Pennsylvania Insurance Department, go to: http://tinyurl.com/mpqtj9a

WILKES-BARRE — The Affordable Care Act, commonly known as Obamacare, was listed as a major force behind Blue Cross of Northeastern Pennsylvania’s decision to seek a merger with a larger company.

In their filing with the Pennsylvania Insurance Department on Wednesday, Highmark and BCNEPA cited the federal law as the force driving fundamental changes in the health care marketplace.

“Payers and providers alike are recognizing that in this new environment, they must explore every opportunity that can strengthen their ability to continue delivering the services that consumers, businesses and communities deserve and expect,” the BCNEPA document states.

As anticipated by health care insiders for months, the two not-for-profit insurers announced Tuesday they want to merge. The full impact of the proposal on BCNEPA’s 750-member local workforce and its 545,000 customers still remains unclear.

But BCNEPA, which reported $1.7 billion in total annual revenue and $1.5 billion in payments to health care providers, maintains in the filing the merger is needed to continue serving customers effectively.

The state Insurance Department must approve the merger, and its review is expected to take a year.

The petition said industry and marketplace changes “pose serious challenges” to BCNEPA’s long-term “viability, sustainability and ability” to continue serving its customers and providers with the same level of performance.

“BCNEPA believes an affiliation with a larger organization will strengthen the combined entity’s ability to serve the long-term needs of residents of northeastern and north central Pennsylvania,” the document states.

Key performance drivers, the petition said, include:

• Increased benefits and an elevated risk pool due to the Affordable Care Act.

• Increased provider consolidation.

• Increased cost-shifting to commercial insurance due to government reimbursement pressures.

BCNEPA claims its ability to generate necessary margins in the future would present a challenge due to market shifts.

The company also listed provider consolidations have led to increased costs. Specifically, the document cites Geisinger Health System, Community Health Systems and Susquehanna Health as examples.

BCNEPA also cited the region’s baby boomer population and the growing number of people on Medicaid and Medicare, stating it does not have the “size, scale or footprint” to participate independently in managed Medicaid or Medicare programs.

And the document was clear to note that BCNEPA is “merging into” Highmark.

How the merger will affect current BCNEPA employees is addressed in the merger requests documents. The current workforce of about 750 people will be retained for 18 months with their seniority intact. However, it is not know which BCNEPA administrative employees would be retained and for how long.

Also, the request stipulates that “Highmark shall … at all times maintain regional operations in the BCNEPA Service Area.”

Just how much is up to the company after the four-year anniversary of the closing date of any such deal. But for the first four years, the number of full-time equivalent employees will remain at either the average number of full-time equivalent employees during the one-year period immediately prior to the closing date or the number of such employees on the closing date, whichever total is lower.

In addition, the Blue Cross of Northeastern Pennsylvania name and the names of its affiliated companies must remain intact for at least one year after the closing date. “Following such period, Highmark may effect such changes in the trade names under which it offers and sells products in the BCNEPA Service Area as it shall determine,” the filing proposes.

A bigger Blue

A “bigger Blue” could mean many things to many people — more coverage and more services for customers and fewer jobs for the local workforce.

Allen Minor, associate professor of health care management at Misericordia University in Dallas, said mergers reduce competition, and that usually results in an increase in pricing.

However, Minor said, with two major health care insurers in the region — Blue Cross and Geisinger Health Plan — there shouldn’t be a noticeable increase in costs to consumers. At least not in the short term.

In fact, Minor said, a larger Blue Cross will add significant additional resources to the BC/BS plans.

“Maybe some of those resources will be used for wellness and preventive health programs that have not be paid for under Blue Cross plans before the merger,” Minor said. “Programs for diet, exercise, social problems and drug addiction could be covered. These programs improve the overall health of the community, thereby reducing health care costs.”

If approved, the merger would add about 550,000 members in 13 northeastern counties to Highmark’s existing membership, which includes 4.3 million members in Pennsylvania. With BCNEPA added, Highmark would have about 5 million policyholders with annual revenues of nearly $18 billion.

An approved merger would reduce the nonprofit “Blues” operating in Pennsylvania from four to three — Highmark, Capital BlueCross of Harrisburg and Philadelphia’s Independence Blue Cross.

According to a story in the Pittsburgh Post-Gazette, Highmark and BCNEPA have had a working relationship for years:

• In 2005, Highmark invested $34 million in two subsidiaries of Blue Cross of Northeastern Pennsylvania, a move that gave Highmark a 40 percent stake in the certain HMO and PPO health plans sold in that insurer’s territory.

• BCNEPA also uses Highmark for claims processing, and the two partner on Medicare Advantage offerings.

Geisinger statement

Joseph Haddock, chief sales officer for the Danville-based Geisinger Health Plan, said the health care landscape is changing and will continue to transform.

“Geisinger Health Plan will continue providing local service and high-quality, affordable coverage options to businesses and individuals in northeast and central Pennsylvania,” Haddock said.

GHP has more than 460,000 members in Pennsylvania, Delaware, Maine, New Jersey and West Virginia. There are more than 49,000 members in Lackawanna County and more than 70,000 members in Luzerne County.

Reporter Andrew M. Seder contributed to this report.

Geisinger statement

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