Blue Cross and Blue Shield of Vermont (BCBSV) is teaming up with Blue Cross and Blue Shield of Michigan (BCBSM) in an affiliation that executives said will allow the Green Mountain State insurer to access better technology and other innovations without losing its local heart.
If approved by regulators, the affiliation plan will allow BCBSV to utilize the data processing and technological heft of BCBSM. Executives at both companies consider the move a possible blueprint for other not-for-profit insurers to follow in order to stay viable in a competitive market.
Lynda Rossi, BCBSM’s executive vice president of strategy, innovation and public affairs, told Fierce Healthcare that this affiliation’s structure sets it apart from other affiliations by health plans both outside and inside the Blues family of insurers over the last few years.
“This structure really allows for a lot more local governance, local personality to continue to be part of the deal,” Rossi said.
A press release noted that premiums paid by Vermont beneficiaries “will stay in Vermont and will be used to pay Vermont member claims, fund capital reserves and plan administration costs, as is the case today. The Vermont plan will remain headquartered there, with locally-based customer service.” BCBSV serves about 240,000 members, or approximately one-third of Vermont residents.
"We were looking for a partner because we knew that we needed access to IT resources and capabilities that we can’t invest in at the scale that we would want to here in Vermont," Sara Teachout, BCBSV’s director of government and media relations, told Fierce Healthcare.
Teachout said that the Vermont Department of Health will need to approve the deal because BCBSV is a “special creation” under state statute. Rossi said that internal approval by the Blue Cross and Blue Shield Association (BCBSA) will involve transferring Vermont’s BCBSA license over to Michigan.
Paul Ginsburg, Ph.D., a senior fellow at the USC Schaeffer Center, told Fierce Healthcare in an email that “it’s pretty clear that the Vermont plan has a need to tell its stakeholders that little will change."
"It is clear that this is not a traditional merger where Michigan managers would take over," he said.
Daniel J. Loepp, BCBSM’s president and CEO, wrote in a company blog post that “while other healthcare businesses consolidate nationally and regionally, affiliating allows us to take advantage of greater scale to enable our two single-state nonprofit Blue Plans to remain dedicated to our members and grounded in our communities.”
Loepp stressed that this is an affiliation, not an acquisition, and that the plans will keep their finances separate. However, though BCBSV will keep its name, it will become part of BCBSM’s “family of companies.”
"You’ve been watching the consolidation that’s happening in the market. It’s happening in the Blues. It’s happening in non-Blues markets as well," Rossi said. "And part of the reason why that consolidation is happening is scale matters. And you must be of a certain size and have a certain subset of capabilities in order to really be able to meet your market needs. I think smaller and midsize plans are having a hard time thinking about how they can do that on their own and are looking for partners that can help them deliver those capabilities.”