N.C. Blues considers for-profit status after plan acquisition

As they have in other Blues consolidations, physicians wonder what will happen when a major insurer decides to grow through the purchase of another plan.

By Cheryl Jackson, amednews staff. July 9/16, 2001.

In a move that heightens physician concerns about industry consolidation, Blue Cross Blue Shield of North Carolina, a nonprofit operation, has bought the state's largest for-profit HMO.

With the June 19 purchase of Partners National Health Plans of North Carolina Inc., the Chapel Hill, N.C.-based Blues plan said it was considering converting to for-profit status, as have a rash of plans in recent years.

For example, Indianapolis-based Anthem Insurance Cos. Inc. filed with Indiana insurance regulators June 21 to become a stock insurance company. The plan needs the approval of the Indiana Dept. of Insurance and Anthem's members. Anthem owns Blues plans nationwide.

Blues are converting to get more money for improvement, including technological upgrades, needed to continue to compete.

"We're committed to doing what it takes to be competitive in the marketplace," said Michelle Vanstory, a spokeswoman for the North Carolina Blues. "We may choose to convert to a public company if we can secure the necessary agreements. It would make us a lot more nimble as a company in many situations."

The plan would have to be able to transfer stock to an independent health care foundation. The Blues plan has not yet made any formal application to state regulators to convert to for-profit status.

As a nonprofit, Vanstory said, the plan is limited in how much money it can use to buy for-profit operations.

The Partners acquisition, the details of which the Blues would not disclose, boosts North Carolina Blues membership by about 20%. Partners, of Winston-Salem, N.C., was owned by nonprofit Novant Health, which owns hospital systems in North Carolina.

Blue Cross and Blue Shield of North Carolina has more than 2 million members. Partners has more than 400,000 members, including 5,000 in South Carolina and another 5,000 in Virginia.

"This may be consistent with good business, and it looks like it would be consistent with a plan that will convert to a for-profit company," said Sam Levitt, vice president at Conning & Co., an insurance industry research firm based in Hartford, Conn.

"Blue Cross didn't have a lot of HMO membership. It looks like Blue Cross and Blue Shield was trying to be the largest in every category. That makes some sense," he said.

Physicians should notice no change because of the acquisition, North Carolina Blues officials said.

Partners, founded in 1986 by physicians and others, won't undergo a name change. Existing contracts will remain in place until they expire.

But physicians are particularly concerned about consolidation among North Carolina's largest health plans.

Before the buy, five plans -- including the Blues and Partners -- controlled about 90% of the market. In some areas of the state, two or three insurers dominated the market.

"I've got 20 e-mails from physicians. They're saying, 'Now there are only four. What are we going to do?' " said Carol Scheele, associate general counsel and director of health delivery systems for the North Carolina Medical Society.

"Every time there's an additional acquisition, physicians lose bargaining power," she said.

North Carolina Blues ranked among the top two plans, according to an August survey of physicians in the state, she added.

Partners, however, was in the middle of the pack and has been named in many complaints in recent months filed by physicians who claim the plan would not communicate with them.

"In terms of who should ... buy Partners, it's not the worst thing that can happen," Scheele said.