The ever-acquisitive Blue Cross and Blue Shield of Illinois is expanding further into the southwestern United States by agreeing to purchase Blue Cross and Blue Shield of New Mexico for an undisclosed amount of cash.
The Illinois Blues, which two years ago merged with Blue Cross and Blue Shield of Texas and last year purchased the commercial health insurance business of NYLCare of Texas, will add 213,000 New Mexico customers to its enrollment portfolio of more than 6 million. The Illinois Blues, the state’s largest health insurer, has more than 3 million subscribers in Illinois.
“We are particularly interested in cross-border business possibilities between New Mexico and Blue Cross and Blue Shield of Texas,” Illinois Blues President and Chief Executive Ray McCaskey said in a statement.
The increase in subscribers is important because health plans today need more customers to gain leverage and buying power to stay competitive.
The Illinois Blues “is pursuing a strategy of consolidation of not-for-profit Blues plans,” McCaskey said. “This affiliation fits well with that strategy.”
Although an increasing number of Blues plans are converting to for-profit companies and making subsequent public stock offerings to access capital, the Chicago-based Illinois Blues plan has been able to expand using cash generated from its $1.2 billion in reserves. Unlike many other not-for-profit, mutual health insurers, the Illinois Blues is fiscally sound, with a debt-free balance sheet.
Financial terms of the deal were not disclosed, pending regulatory approvals that include clearance from state insurance departments.
“It will substantially improve our financial strength as we become part of a company with reserves of nearly $1.2 billion,” New Mexico Blues President and Chief Executive Norm Becker said in a statement.
The deal also secures the Illinois Blues another venue to process and administer claims for the federal government. The New Mexico Blues plan is the claims administrator for the New Mexico Comprehensive Health Insurance Pool and Indian Health Services, a federal agency serving 1.2 million Native Americans throughout the U.S.
The Illinois Blues decided to stop processing Medicare claims two years ago, just months before it paid $140 million in civil fines to settle charges that it submitted false statements to the government while administering Medicare claims from 1984 to 1995.
Although the Illinois Blues’ decision to exit the Medicare claims processing business was related to an investigation preceding the settlement, the Chicago-based insurer was not prevented from doing business with the federal government.
“We got out of Medicare, but didn’t get out of the Federal Employee Health Insurance Program,” said Robert Kieckhefer, Illinois Blues vice president of public affairs. “There was no prohibition of any kind on doing business with the federal government.”
