WILKES-BARRE — Two of the state’s largest health insurers signed a letter of intent Tuesday to “pursue a stronger affiliation,” but other than that vague language the intent and just what that affiliation will mean are being kept quiet.
Anthony Matrisciano, spokesman for Blue Cross of Northeastern Pennsylvania, said the letter of intent is “not a final agreement,” but enables the Wilkes-Barre-based company to hold “exclusive discussions” with Highmark Inc. of Pittsburgh. He would not comment on whether the goal is a merger or sale and neither would his counterpart at Highmark, Aaron Billger.
“I think it’s unfair to speculate,” Billger said, adding that right now it’s simply discussions to “pursue a stronger affiliation. How we characterize that has yet to be determined.”
The discussions, Matrisciano said, will focus on a goal of enabling the two not-for-profit health insurance companies “to conduct detailed discussions and perform necessary due diligence, with the goal of creating greater efficiencies and value for the benefit of their members and customers.”
The major competitor to BC/NEPA is Geisinger Health Plan, which has approximately 450,000 members.
GHP is a not-for-profit health maintenance organization (HMO), that serves the health-care needs of members in 43 counties throughout central and northeastern Pennsylvania. GHP also serves portions of neighboring states.
As of August 2012, GHP had more than 50,000 health care providers participating in its network including: 4,426 primary care physicians; 39,423 specialist physicians; and 105 participating hospitals.
GHP employs 1,200 people, the majority based in Pennsylvania.
“It’s not at all unexpected as the insurance industry is riding a wave of consolidation,” said Geisinger Health System Chief Operations Officer Frank Trembulak. “We expect to see more consolidation of insurance companies moving forward.”
Denise S. Cesare, president and CEO of Blue Cross of Northeastern Pennsylvania, noted the companies already have built a relationship of cooperation and that Highmark has provided some services for the nearly 550,000 Blue Cross of Northeastern Pennsylvania customers.
“Our two companies have enjoyed a long and successful history of collaboration, providing a solid foundation from which to pursue an even stronger affiliation,” Cesare said in a release. “I am confident that the result of our discussions will best serve the long-term needs of the residents and communities across BC/NEPA’s 13 counties — maintained regional presence, representation, employment and enhanced products.”
Matrisciano said the goal “is to have a better and stronger company” and the next phase of discussions will determine if and how that’s possible. He said any impact on the company’s 745 employees is unknown.
He also said he could confirm that “after rigorously considering various options and candidates for affiliation, BC/NEPA’s board chose to enter into exclusive affiliation discussions with Highmark, Inc.”
“Highmark views the Northeastern Pennsylvania region and the opportunity to enhance our partnership with BC/NEPA as very important to the community,” Dr. William Winkenwerder Jr., president and CEO of Highmark Health, the parent company of Highmark Inc. said in a release. “We are excited about this opportunity and what a closer affiliation can accomplish for the benefit of BC/NEPA members in the northeastern and north central Pennsylvania market.”
Billger said the two already have “a lot of collaboration” and additional conversations about increasing that partnership couldn’t hurt.
Matrisciano said the companies will have no further comment until the next phase of private discussions has been completed. If any agreements move forward, he noted the state Insurance Department and other regulators would get involved “and will have to review and approve anything.”
Areas of service
Together, Blue Cross of Northeastern Pennsylvania and Highmark provide health insurance plans that serve more than 5.4 million members in 62 of Pennsylvania’s 67 counties, as well as in Delaware and West Virginia. Independence Blue Cross of Philadelphia and Capitol Blue Cross in Harrisburg are the only other Blue Cross affiliated insurers in the state.
In 2007, Highmark and Independence began merger talks but the plan was pulled off the table in 2009 after the state insurance commissioner indicated the combined company would have to give up either the Blue Cross or Blue Shield trademark. There were also concerns over competition, or lack of.
Founded in Wilkes-Barre in 1938, Blue Cross of Northeastern Pennsylvania has offered health insurance to residents in northeastern and north central Pennsylvania. After just one year, membership rose to 10,140. Today, the company has nearly 550,000 members in a 13-county service area.