Connecticut Insurance Commissioner Susan Cogswell has approved the acquisition of ConnectiCare by Health Insurance Plan of Greater New York. The merger price is $350 million.
Regulators in Massachusetts and New York must also approve the deal.
HIP-NY is a not-for-profit health service corporation; ConnectiCare is a for-profit firm. HIP has more than one million members in the New York metropolitan area. ConnectiCare has 265,000 members.
The merger plan calls for HIP to strengthen ConnectiCare’s market position and consider offering new products. It may include targeting segments where Connecticare’s current presence is thin, such as labor unions and municipal government benefit plans, where HIP is strong.
HIP is also in the process of developing a plan for expansion in western Massachusetts and other parts of Connecticut. HIP and ConnectiCare are expected to target the large group market of New York employers with employees residing in Connecticut.
Rating companies generally view the transaction favorably. Fitch noted it gives HIP-NY immediate access to Connecticut and western Massachusetts. Best agreed but expressed some concern over the size of the acquisition and the effect of the purchase on HIP-NY’s balance sheet.
The decision notes that legislation is now pending in New York that would permit certain not-for-profits to convert to for-profit status, which if passed would be an option for HIP-NY to weigh.
HIP expects the synergies following the merger to result in about $7 million in savings by 2007.
HIP-NY promised to maintain a significant presence in Connecticut, including keeping its corporate offices in the state, retaining existing management, and maintaining at least 447 of the 530 employees in Connecticut.
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