Highmark, IBC call off merger

Highmark Inc., Pittsburgh, and Independence Blue Cross (IBC), Philadelphia, have called off their merger after opposition to the consolidation by Pennsylvania Insurance Department (PID). Highmark-IBC submitted the applications to combine to the PID in April 2007.

The PID conducted a 21-month review of the proposed consolidation and retained global expert advisory firm LECG to analyze the potential impacts on competition and potential benefits from the proposed consolidation. In September 2008, LECG released its 192-page report and found that the filing as proposed by Highmark-IBC “would be to substantially lessen competition in insurance in [Pennsylvania] or tend to create a monopoly therein.”

Pennsylvania Insurance Commissioner Joel Ario says that Pennsylvania consumers already face one of the least-competitive health insurance marketplaces in the country, and the merger would have made it worse. According to Ario, the proposed consolidated company would have had a dominant position in the Pennsylvania market with projected $17 billion in annual premium revenues and a 51% market share, the fifth highest market share of any health insurer in a single state, behind Noridian Mutual in North Dakota with 70%, Premera Blue Cross in Arkansas with 61%, Blue Cross Blue Shield of Alabama with 57% and Wellmark in Indiana with 54%.

“Throughout the review process, we have stated repeatedly that we would not give up one of our brands. We have spent more than 70 years developing our brands’ value in our markets and they are an integral part of our corporate identities and reputation.

“While we believe that the combination as originally proposed would have been of great benefit to all of our stakeholders, we concluded that giving up one of our brands would preclude the new company from delivering to our customers, communities, and the Commonwealth the full results we had projected. This is genuinely disappointing.”