When outcomes are more important than egos is what I would ascribe to the multi-relationship conversations going-on in Philadelphia where Independence Health, a nonprofit, is in conversations with "companies discussing combining some operations to share costs or a fuller merger, among other options." As the CEO has stated: “We continue to explore all possibilities that can improve the health and wellness of the members we serve. At Independence, we are thinking and acting boldly to lead change.”
So I ask, if the really big nonprofits think cost-sharing and even mergers are important to their meeting the needs of their customers, why aren't many more nonprofits, especially the tiny (budget) folks, doing the same thing? Passion, egos......? I believe that when the going gets tough, the tough should get going and do better together. But that's just me. Check-out the details from the Wall Street Journal article for inspiration and insight. Let's not lose these opportunities to gain efficiency and improve effectiveness.
Independence Health Group Explores Strategic Options
Philadelphia nonprofit insurer and others weighing mergers or other steps amid industry consolidation
By ANNA WILDE MATHEWS
Updated Feb. 18, 2016 7:34 p.m. ET
Independence Health Group Inc. is examining its strategic options, as the Philadelphia nonprofit insurer and others weigh mergers or other steps amid a wave of consolidation spurred by the federal health-care overhaul.
The parent of Independence Blue Cross is working with advisers on the review, according to a person familiar with the matter. Typically, such analyses involve weighing shifts in strategy, like a merger or restructuring. In the past, some nonprofit Blue Cross and Blue Shield insurers have combined or become for-profit and, ultimately, publicly traded. But it isn’t clear if an initial public offering would be on the table for Independence.
Independence played a key role in gathering as many as 10 nonprofit Blue Cross and Blue Shield insurers in December and January, according to people with knowledge of the matter. In the talks, which were exploratory, the companies discussed combining some operations to share costs or a fuller merger, among other options, these people said.
Formal talks among this full group aren’t scheduled to resume, according to the people. But at least some of the companies are likely to continue conversations that could eventually lead to mergers or other forms of collaboration, they said.
Independence Chief Executive Dan Hilferty said the company is “committed to collaborating and partnering with other leaders in health care, including our fellow Blues.” He added: “We continue to explore all possibilities that can improve the health and wellness of the members we serve. At Independence, we are thinking and acting boldly to lead change.”
Independence had more than $13 billion in revenue in 2014. In addition to its Blue insurance business, focused on the Philadelphia area, the company co-owns a big national Medicaid business under the AmeriHealth Caritas name.
The 36 separate Blue Cross and Blue Shield insurers use the Blue name under a deal with the Blue Cross Blue Shield Association.
The nonprofit Blue insurers are coming under rising pressure on their home turf, however. The industry’s biggest for-profit players are bulking up with huge deals that will help them shave costs and boost market share. Aetna Inc. agreed to acquire Humana Inc. Meanwhile, Anthem Inc., the parent of 14 Blue plans, is seeking to buy Cigna Corp.
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Together, the deals, which are awaiting approval from regulators, would shrink the top five health insurers to a big three, along with UnitedHealth Group Inc., currently the largest. Each would have annual revenue of more than $100 billion.
The Blue Cross and Blue Shield companies, like other insurers, were already facing a challenge from hospitals and other health-care providers that are themselves consolidating, generating more leverage in rate negotiations.
Some of the nonprofit Blue insurers are also facing a financial squeeze because of the Affordable Care Act’s transformation of the individual insurance market, which has long been a stronghold of theirs. The law’s exchanges have generated losses so far for many of them.
In addition to Independence, companies involved in the December/January talks included Oregon-based Cambia Health Solutions Inc., Blue Shield of California and Pittsburgh-based Highmark Inc. In the discussions, which were early-stage, the companies talked about combining some operations to share costs or a fuller merger, among other options, the people familiar with the matter said.
Formal talks among this full group aren’t currently scheduled to resume, according to the people. But at least some of the companies are likely to continue conversations that could eventually lead to mergers or other forms of collaboration, they said, adding that various Blue Cross and Blue Shield insurers have talked on and off about deals over the past few years.
A spokeswoman for Cambia said “cooperation isn’t new amongst not-for-profit Blue plans…We always look to understand other Blue plans’ visions and missions, and determine if there is opportunity to create value for consumers by working together.” A spokesman for Blue Shield of California said it and other nonprofit Blue plans “often explore opportunities for cooperation and collaboration.” A spokesman for Highmark said the “discussions were not unlike meetings we have all the time with other Blue plans.”
Like Independence, several of the insurers have already broadened their focus. Cambia, the parent of Regence BlueCross BlueShield, has diversified beyond insurance by purchasing and investing in companies with a consumer health-care and technology bent. Blue Shield of California recently acquired a Medicaid-focused managed-care company. Highmark took over a major hospital system and owns large vision- and dental-insurance plans, among other assets.
But deals to merge free-standing Blue insurers could face formidable obstacles. The nonprofit Blue insurers are sometimes mutual companies, which can require a vote of members, or policyholders, to complete a deal. Others have a special status under the laws of their states that may make acquisitions challenging.
Certain combinations might also raise worries about market concentration. A previous attempt to combine Independence Blue Cross and Highmark was called off in 2009 after Pennsylvania regulators raised concerns the deal would hurt competition in the state.
However, for much of their business, Blue insurers don’t generally compete head-to-head because of the nature of their licensing agreements. Indeed, they are facing antitrust suits alleging that their setup amounts to an illegal cartel. The Blue Cross Blue Shield Association has said its practices are legal and have been established for decades.
Write to Anna Wilde Mathews at [email protected]