Blues insurers make move to expand into Medicaid

AP News
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Posted: Aug 09, 2011 2:12 PM
Blues insurers make move to expand into Medicaid

Two of the nation's largest not-for-profit health insurers said Tuesday that a new joint venture will provide an opportunity for Blues insurers nationwide to expand into Medicaid coverage just as states are seeking ways to save money in the program and the ranks of Medicaid enrollees is poised to grow.

Philadelphia-based Independence Blue Cross and Detroit-based Blue Cross Blue Shield of Michigan are purchasing AmeriHealth Mercy, which has Medicaid managed-care contracts in various states, including Pennsylvania, Indiana, and South Carolina.

Independence Blue Cross already owns 50 percent of Philadelphia-based Amerihealth. Buying the other half of AmeriHealth will cost $170 million, and the insurers' boards have authorized more than $200 million in additional capital investment. The transaction is expected to close in coming months, company officials said.

They hope the partnership will help Blues insurers in other states compete for contracts to run Medicaid managed-care programs, which cash-strapped states are increasingly turning to as a way to control costs in medical care for the poor and disabled.

Independence's president and CEO, Daniel Hilferty, said they are considering a number of strategies where other Blues insurers at some point buy into Amerihealth at a minority level or they create a 50-50 partnership to develop a Medicaid managed care model for their state.

"There is a lot of interest across the country," Hilferty told reporters on a conference call Tuesday announcing the venture.

Officials from the two Blues companies also noted that the 2009 federal law overhauling health care will substantially expand Medicaid eligibility beginning in 2014, citing a Kaiser Family Foundation estimate that it would expand the number of Medicaid enrollees by 16 million by 2019.

The nation's 39 independent Blues health insurers cover one in three Americans, but two-thirds of the Blue do not currently serve Medicaid consumers, they said.

After the transaction is complete, Independence Blue Cross will assume 60 percent ownership of Amerihealth, and Blue Cross Blue Shield Michigan will assume 40 percent, officials said. Michigan paid $136 million for their stake in AmeriHealth Mercy, while IBC paid $34 million in the transaction, they said.

"This is a strategic reuse of investment dollars," said Daniel Loepp, president and CEO of Blue Cross Blue Shield Michigan. "We would expect a very good return on our investment, on top of the fact (we're) proving tremendous health care moving forward."

Medicaid, the 45-year-old federal program created to help states pay for medical and long-term care for the poor and disabled, currently covers about 55 million Americans.