The Blues Remain on the Prowl

Nonprofit Blue Cross and Blue Shield health-insurance plans in the U.S. are in tough straits. They're increasingly in competition with nationwide giants like WellPoint and UnitedHealth Group, whose scale gives them leverage to hold the line on discounts with larger hospital chains and the resources to invest in major IT projects -- however questionable their merits. And their nonprofit status makes it harder to raise funds, at least in normal times -- at least the stock-market crash and the credit crunch have leveled the playing field a bit in that respect.

So it's no surprise that the Blues are still on the prowl for ways to get bigger, faster. The latest news, courtesy of the Boston Globe, is that Blue Cross and Blue Shield of Massachusetts is in discussion with Excellus BlueCross BlueShield of Rochester, N.Y. over some sort of vaguely defined partnership that could eventually result in anything from a joint venture to a full merger.

True, BCBS Massachusetts VP Jay McQuaide told the Globe that his organization was primarily interested in finding new products to sell, particularly a long-term care insurance policy that Excellus currently markets. The idea is that BCBS Massachusetts would be more competitive with nationwide insurers if it could offer a "full suite" of insurance products.

Signs, however, are pretty good that something larger is in the works. The Gloe notes that BCBS Massachusetts CEO Cleve Killingworth formerly served as SVP of healthcare operations for Excellus, back when it was known as Blue Cross-Blue Shield of Rochester. BCBS Massachusetts has also actively acquired other insurance and insurance-related businesses in conjunction with other Blues plans.

There's certainly precedent. Most recently, two Pennsylvania Blues -- Highmark and Independence Blue Cross -- have been working on a merger since April 2007, although the effort faces significant opposition within the state and still requires regulatory approval.