Blue Cross and Blue Shield Louisiana plan to join Elevance Health, formerly known as Anthem, in an acquisition expected to close later this year, the two companies announced Monday.
Blue Cross and Blue Shield Louisiana is the state’s largest insurer, with more than 1.9 million policyholders. They will join Elevance’s network of 119 million people, which includes customers outside of the Blue Cross brand. Both companies declined to say how much the transaction cost.
The 3,000 Louisiana employees will also join Elevance, but operations for the Louisiana plan will remain at Blue Cross headquarters in Baton Rouge, Blue Cross CEO Dr. Steven Udvarhelyi said.
“We will stay here as a locally based blue plan,” Udvarhelyi said. “We will stay in our offices.
Udvarhelyi said policyholders should expect their plans to continue unchanged for now. Once the acquisition is complete, Udvarhelyi and Elevance executive vice president Morgan Kendrick said members can expect an expansion of what they call “overall health capabilities” — such as an integration of behavioral health and physical health, special attention to high-risk seniors, pharmacy solutions and palliative care.
“Once we join Elevance, in two years we will get the capability advancement that, if we did it on our own, would take us 10 years,” Udvarhelyi said.
Louisiana will be the 15th state-run Blue Cross plan to join Elevance, which changed its name from Anthem Inc. last year as it aimed to rebrand itself as a company with broader interests. wide in health.
Cost, regulations spurred acquisition research
Blue Cross began seeking such a partnership two years ago, according to Udvarhelyi, due to the rising costs of acquiring digital capabilities and the difficulty of quickly investing in services, such as those for chronic diseases, palliative care and behavioral health.
“The cost of doing this and the time to scale is becoming more and more important,” Udvarhelyi said. “On top of that, we are all subject to increasing regulation at the federal level and sometimes at the state level.”
The insurance industry is also made up of increasingly large players, which has made it harder to keep track of smaller companies.
“We can’t play on that playing field like we are today, but by joining Elevance, we will have access to much greater resources where we can really compete against national competitors in a much more meaningful way,” said said Udvarhelyi.
Agreement is subject to state and federal approval
The agreement is subject to approval by the Louisiana Department of Insurance and the Federal Trade Commission of the Department of Justice. In the past, acquisitions of insurance companies have been derailed over fears of reducing market competition.
Health economist Walter Lane, a professor at the University of New Orleans, said the deal is unlikely to be flagged by regulators because it does not involve the merger of two Louisiana companies. for a bigger slice of the health insurance pie, and therefore not increase the company’s focus in this area.
“Blue Cross is already the big market gorilla holding the majority of fonts,” Lane said. “Because all the other (Elevance companies) are in other states, it doesn’t seem to make a difference in the competitive environment.”
Such mergers are usually driven by a few different factors, Lane said. The first is that a large company has a greater basis for allocating risk among policyholders. The more members there are, the less it hurts the insurance company financially when some policyholders have exorbitant medical costs.
Operating expenses such as claims processing should drop, Lane said, and joining a larger business can also help Blue Cross protect against catastrophic losses, such as a localized outbreak of disease.
The effect on health care costs, quality
Joining a larger company will give BCBSLA more money to invest in potential improvements for policyholders, said Vivian Ho, health economist at Rice University and professor at Baylor College of Medicine. But there is little data on how mergers affect customers.
“There just haven’t been any studies showing that there is an improvement in quality after insurer consolidation,” Ho said.The insurer can make savings, but since it is a concentrated market, there is no obligation to pass on the savings. »
Udvarhelyi cited health care inflation as another driver of the meltdown and acknowledged that he cannot predict how costs will change. But he said the services and platforms BCBSLA would access through Elevance would help control costs.
“What I can say for our customers and our policyholders, they will see better improvements in health and lower increases in healthcare cost than if we continue to do this alone,” Udvarhelyi said.