HealthNow, Excellus have talked over merger
For now, such a deal is ‘unlikely to occur’
HealthNow New York and Rochester rival Excellus BlueCross and BlueShield discussed a possible merger of the two upstate health insurance giants recently, but the talks have ended in part due to the tumult in the economy, officials of both companies confirmed Monday.
The negotiations could have led to a single unified BlueCross and BlueShield plan and brand across Upstate New York, where the two companies presently duke it out in many major markets. Buffalo-based HealthNow owns BlueCross BlueShield of Western New York.
Such a merger would create a powerhouse with more than $7 billion in revenues and about 2.6 million members across 53 counties, making it the dominant player north of New York City and its suburbs.
Any merger would face approval by the state Insurance Department, and could face other state reviews as well.
“It’s no secret we have long pursued the goal of unifying our nonprofit BlueCross and BlueShield plans with a single brand across upstate New York,” David Klein, CEO of Excellus parent Lifetime Healthcare Cos., said Thursday in a e-mail memo to employees that was obtained by The Buffalo News. “There was a shared interest in achieving a unified brand.”
But it wasn’t to be, at least not yet. According to Klein’s memo, sent in apparent response to employee questions about the possibility of such a blockbuster deal, officials have “decided a merger with [HealthNow New York] is unlikely to occur in the foreseeable future.”
Instead, he wrote, the company will focus on growing its Western New York presence through its Univera Healthcare subsidiary. “We have some exciting ideas we will be employing to make that happen,” he wrote. “Over the next few months, we will be providing you with additional information regarding strategies and tactics we will be employing in that market.”
He did not elaborate, but exhorted employees to continue taking care of customers. Univera spokesman Peter Kates declined to comment, saying the memo “speaks for itself.”
HealthNow spokeswoman Karen Merkel-Liberatore confirmed the talks took place “within the past 12 months” but not now. No memorandum of understanding was signed, she said, and the discussions were largely on a higher level.
“Periodically, over the last five years, we’ve had occasional discussions with Excellus on merger possibilities. Sometimes those discussions are very active, and then sometimes they quiet down,” she said. “As of right now, there is nothing to report and those discussions have entered into a quiet stage once again.”
However, she said the failure of the recent round did not stem from resistance or a lack of interest on either side, but rather from the economic turmoil and a temporary need to concentrate on their own issues.
“In the past, [HealthNow CEO] Alphonso [O’Neil-White] has publicly stated that we are looking for growth opportunities that make good business sense and will enable us to continue to provide our members with the best possible service and value,” she said.
If a merger does take place at some point, it would leave Independent Health Association of Williamsville and Schenectady- based MVP Health Care as among the only competitors in several markets.
“Consolidation of health plans is brought about for administrative efficiencies, but does not address the underlying challenges we face in the health care industry,” said Independent Health spokesman Frank Sava. “Rather than focusing on consolidations that don’t address the true challenges facing health care, we are focusing our attention on lowering the overwhelming and unsustainable cost of care.”
Merkel-Liberatore said she did not know when talks might resume.
Employees, insurance brokers and even consumers have long speculated about such a merger, and what it could mean for the region. Rumors have abounded in the past, but some observers also thought the rivalry between the two would prevent a deal from taking place.
“In a lot of ways, that makes a lot of sense in as much as you’ve had competing Blues plans within an hour of each other. It does make sense to have a uniform Blues product throughout that footprint,” said Kevin Gannon, vice president and group division manager for M&T Insurance Agency. “But there is something to be said for having competing Blues plans in neighboring markets.”
Only one company can have a BlueCross and BlueShield license in each market. Buffalobased HealthNow has both licenses in Buffalo and half of it in Albany through BlueShield of Northeastern New York. Excellus has both in Rochester, Syracuse, Binghamton, Watertown and Utica. However, both companies operate other non- Blues health insurance businesses on each other’s turf — including Univera, which is not a BlueCross or BlueShield licensee.
Excellus has more than 1.8 million members and 7,000 employees in 39 counties from Buffalo east to Utica and from Binghamton north to Watertown and the North Country. That includes 223,000 members and 550 employees locally.
HealthNow has more than 815,000 members in 37 counties, including those in traditional, self-insured and “administrative services only” plans. Most of those counties overlap with Excellus. The company employs 2,300 — 1,300 in Buffalo.
