Pa. Two Largest Health Insurers Say Merger Won’t Hurt Competition

May 2, 2007

Pennsylvania’s two largest insurance companies have formally asked state regulators to approve a change in control of their subsidiaries that would take effect when the nonprofit companies merge.

Independence Blue Cross of Philadelphia and Highmark Inc. of Pittsburgh outlined the advantages of their proposed merger and explained how it would comply with state antitrust laws in more than 3,000 pages of documents filed with the state Insurance Department last Friday. The department made the filings available on its Web site this week.

The companies presented a market analysis that concluded a merger “will not substantially lessen competition or tend to create a monopoly in the lines of insurance in which (the companies) engage.”

The merged company would become the state’s largest health insurer, with more than 53 percent of the market.

The proposed merger, which the company boards approved March 28, “offers the opportunity to create a more efficient enterprise that will be better positioned to satisfy the needs of its customers by holding down costs and investing in desired new technologies and products,” the companies said in their filings.

The filings did not say how a merger would affect insurance rates, however.

Lawmakers, hospitals, doctors and consumer advocates have expressed concerns that the merger would reduce competition — leading to higher premiums and lower reimbursement rates to providers — and that a larger company would deter other insurers from entering the state.

Independence currently serves 3.4 million members, mainly in the Philadelphia area, and employs 9,500 people. Highmark has 4.6 million members, mostly in the western part of the state, and employs 18,500 people, more than half of them in Pennsylvania.

The filings also repeated statements the insurers have made about the merger’s economic benefits — more than $1 billion in savings and revenue growth over six years.

Among other measures, the combined company plans to cut prescription drug costs for customers by $285 million, and give more than $650 million to help the uninsured and underinsured

The Insurance Department will seek public comments on the merger over the next 60 to 90 days, and it will likely hold public hearings around the state in the fall, department spokeswoman Rosanne Placey said.

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On the Net:

Pennsylvania Department of Insurance: http://www.ins.state.pa.us

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