Senator White's Statement on Blues Recommendations

Banking and Insurance Committee sending comments to Insurance Dept.

Senator Don White, (R-41 and Chairman of the Senate Banking and Insurance Committee) issued the following statement today (November 20) after his committee approved its recommendations to the Department of Insurance regarding the proposed merger of Highmark and Independence Blue Cross.

"Today the Senate Banking and Insurance Committee finalized its recommendations regarding the proposed merger of Highmark Inc. and Independence Blue Cross, essentially capping off an extensive and comprehensive process that began in March 2007 when the proposed merger was first announced.

"Immediately after that announcement, the Banking and Insurance Committee developed, considered and approved legislation that would provide essential state oversight of the Blues merger. Act 62 of 2008 represents a true victory for Pennsylvania's health care providers, consumers and the smaller health care insurers who otherwise could have faced dramatic consequences had the Highmark-IBC merger been permitted to proceed without essential state regulatory review.

"Act 62 requires that any merger involving the 'Blues' be approved by the Department of Insurance. The new law also empowers the Senate Banking and Insurance Committee and the House Insurance Committee to submit written comments and recommendations to the state Insurance Commissioner.

"In compliance with our responsibilities under Act 62, the Banking and Insurance Committee held two public hearings, one in September and one in October, to give interested parties one final opportunity to provide their thoughts, insights and opinions on the merger proposal. Afterwards, a memo was sent to the members of the Banking and Insurance Committee requesting that they submit their comments and recommendations by November 3.

"With months of deliberations completed and stacks of testimony and supporting documents at hand, we drafted the recommendations that were approved by the Committee today and now will be sent to the state Insurance Commissioner.

"First, is a recommendation that the Insurance Department deny the proposed merger. Certainly that recommendation should come as no surprise to anyone who has followed the proceedings of the Banking and Insurance Committee and heard the presentations by Highmark, Independence Blue Cross, their competitors, health insurance industry advocates, consumers and even the experts retained by the Department to consider the impact of the proposed merger.

"The prevailing themes throughout the Banking and Insurance Committee's review were that the proposed merger would further restrict, if not completely eliminate, any remaining competition in Pennsylvania's health care insurance marketplace, while providing minimal – if any – tangible benefits for policyholders and/or providers.

"With that in mind, the specific recommendation to the Insurance Commissioner states:

The Committee believes the proposed new corporation 'NewCo' affirmatively violates three of the seven standards prescribed in the Insurance Holding Company Act which the Insurance Commissioner is required to follow when issuing a final determination on the proposed merger.

"First, we believe the merger would violate standard 2 in that it would substantially lessen insurance competition in the Commonwealth and create a monopoly therein.

"Second, we believe it violates standard 4 in that the merger fails to provide tangible benefits to policyholders and is not in the public interest.

"Finally, we believe it violates standard 6 in that the merger is likely to be hazardous or prejudicial to the insurance buying public.

"We have provided specific, detailed information with the recommendation that supports the contention that the merger violates those standards and we hope the Insurance Commission will concur with that assessment.

"However, in the event that the Insurance Department does not concur, we also submitted our second recommendation, which calls on the Insurance Commissioner to set very specific conditions if the Department is inclined to approve the merger. The proposed conditions are a list of specific and in some cases highly technical caveats intended to protect consumers, provide transparency, and ensure that the integrity of the health care insurance provider network is maintained.

"In summary, the Committee's primary recommendation is that the Insurance Commissioner should reject the merger. The testimony we received over the past year reinforced concerns that this merger could create a single, multi-billion dollar, mega-entity which could crush what little competition remains in Pennsylvania's health care insurance market. The very last thing we need in the Commonwealth, and in the nation, is further limitation on the competitiveness in the health care insurance market. There are real concerns that costs will skyrocket, quality of care will decrease and the workforce will be stuck with the bill.

"However, if the Department moves to approve the merger, the Banking and Insurance Committee strongly recommends that certain contingencies be in place. Any approval must be contingent upon Highmark and IBC justifying beyond a reasonable doubt that this merger will provide meaningful and long-term benefits to the people they insure, the providers they reimburse and the health care interests of Pennsylvanians at large."

Recommendation 1 (PDF)
Recommendation 2 (PDF)

Contact:

Joe Pittman
(724) 357-0151, cell (724) 541-0552