Major Blue Health Insurers to Combine

Tie-up brings together health-care players with combined $16 billion in revenue, covering over six million people.

Anna Wilde Mathews

Updated March 12, 2019 2:09 p.m. ET

Two major Blue Cross Blue Shield insurers plan to tie up in a deal that will bring together powerful regional players that generate about $16 billion in combined revenue and cover more than six million people.

Cambia Health Solutions and Blue Cross and Blue Shield of North Carolina will merge their managements in a combined structure that will retain the Cambia name. The two not-for-profits said they aim to bolster their investments and speed progress in developing new health-data approaches and consumer tools, among other areas.

The move will draw close national attention because both are members of the Blue Cross Blue Shield group of insurers, which includes 36 companies. Collectively, the Blue insurers are a unique and powerful force in the industry, covering more than 100 million Americans, with deep local market share and a key role in the Affordable Care Act marketplaces. But in recent years the Blue insurers have largely sidestepped industry consolidation that created massive national players, with many remaining independent firms focused on just one state.

Lately, major mergers among Blue insurers “have been once-in-a-blue-moon types of transactions,” said Deep Banerjee, an analyst with S&P Global Ratings. “If there is a transaction, it does open the doors for others to follow....It absolutely can create momentum.”

Under the new deal, neither insurer will formally acquire the other or make a financial payout. The two companies said the deal, which they are terming an affiliation, was structured to give them flexibility, with continued local presence but also the ability to combine resources to invest in technology and other initiatives.

GETTING BLUER

Two major Blue Cross Blue Shield insurers are tying up.

·         Cambia Health Solutions

·         CEO: Mark Ganz

·         HQ: Portland, Ore.

·         2018 revenue: $6 billion

·         People covered: 2.6 million

·         Blue Cross and Blue Shield of North Carolina

·         CEO: Patrick Conway

·         HQ: Durham, N.C.

·         2018 revenue: $9.9 billion

·         People covered: 3.7 million

·         Source: The companies

“This is about getting scale in innovation and moving faster,” said Mark Ganz, the current chief executive of Cambia, which is based in Portland, Ore. Patrick Conway, the chief executive of the North Carolina insurer, said the two companies “are not-for-profit local health plans that are focused on the communities we serve, and we think this will allow us to deliver better results to them.” The two companies said they would achieve operational savings by combining some functions.

Dr. Conway, 44 years old, will be CEO of the revamped Cambia. Mr. Ganz, 58, will be executive chair. The new Cambia board will include nine current Cambia board members and 10 people now on the North Carolina Blue board. The deal will require approval from state regulators, the companies said.

Cambia currently sells Blue plans under the Regence name in Oregon, Utah, Idaho and much of Washington state. The company, which had revenue last year of about $6 billion, covers around 2.6 million people, and has already invested heavily in technology and consumer-health offerings.

Blue Cross and Blue Shield of North Carolina holds a commanding position in its home state, with approximately $9.9 billion in revenue last year and 3.7 million people covered. The company has moved aggressively into new forms of payment to health-care providers that aim to boost quality and efficiency. It will legally remain a separate company, and retain its name and assets, but it will sign a 20-year agreement for the revamped Cambia to manage its operations.

Moves to combine Blue insurers have been rare in recent years, with no company emerging that parallels the national reach ofUnitedHealth Group Inc. or CVS Health Corp.’s Aetna. Several Blue insurers have talked about combining in recent years, according to people with knowledge of the matter, with no major deals resulting until the new one. Mr. Banerjee said the most recent deal was a small one, the 2015 combination of Highmark Inc. and Blue Cross of Northeastern Pennsylvania.

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In the 1990s and early 2000s, a rapid spate of deals among Blue insurers brought together the company now known as Anthem Inc., the second-biggest U.S. health insurer, which is the parent of 14 Blue plans. Anthem’s attempt to take over national player Cigna Corp. was blocked by a court in 2017 on antitrust grounds. Health Care Service Corp., a not-for-profit, is also one of the biggest U.S. insurers with Blue plans in five states, including Texas and Illinois.

Efforts to combine Blue insurers can be challenging, for reasons including local political sensitivities and the legal structures of the not-for-profits, which sometimes have a special status under state law. In 2009, Highmark and Independence Blue Cross withdrew a planned deal, saying that they expected the Pennsylvania insurance regulator to turn it down; both companies were major insurers in the state of Pennsylvania.

https://www.wsj.com/articles/major-blue-health-insurers-to-combine-11552411620