Agreement on Blue Cross merger would get additional $23M and Great Falls call center

2013-03-13T17:25:00Z 2013-03-14T05:35:07Z Agreement on Blue Cross merger would get additional $23M and Great Falls call centerBy MIKE DENNISON Gazette State Bureau The Billings Gazette
March 13, 2013 5:25 pm  • 

HELENA — The Illinois health insurance giant that wants to buy Blue Cross and Blue Shield of Montana has agreed to increase its purchase price by almost $23 million — if state insurance regulators agree by March 30 that they’ll eventually approve the deal.

The agreement, negotiated by state officials and signed off on Tuesday by Attorney General Tim Fox, also includes a promise by Health Care Service Corp. to open a 100-employee call center in Great Falls within one year after state approval of the merger.

“The call center was not part of the original purchase proposal, but HCSC is willing to establish it in Montana if it has a reasonable expectation that it will be doing business here,” said John Barnes, spokesman for Fox.

Yet the chief counsel for state auditor and insurance commissioner Monica Lindeen said Wednesday that his office isn’t prepared to give the deal a green light by March 30 and called the agreement signed by Fox’s office “premature.”

“We appreciated that (HCSC) brought more money to the table,” he said. “We thought they should bring more money to the table. But we thought it was a disservice to the public to enter into an (agreement) before the hearing.”

The hearing, which began Tuesday in Helena and is continuing Thursday, is on whether the attorney general and the state insurance commissioner should decide the merger is in the “public interest” and should be approved.

Former state Supreme Court Justice Bill Leaphart is conducting the hearing and will make a recommendation on approval. Lindeen and Fox then make the final call.

Laslovich said Lindeen’s office won’t even submit its recommended findings to Leaphart until April 19, and that the hearing involves testimony on the company’s valuation and transaction impacts.

HCSC, based in Chicago, announced last year that it had agreed to buy Blue Cross, the largest private health insurer in Montana, for $17.6 million. HCSC is a coalition of Blue Cross plans in Illinois, Texas, New Mexico and Oklahoma and has 13 million customers. Blue Cross in Montana has 270,000 customers.

Under state law, Lindeen must evaluate the transaction’s impact on health insurance markets and customers in Montana and decide whether it’s in the best interests of the state.

Fox, as attorney general, must decide whether the purchase price is a “fair market value.” The proposed deal also sets up a new nonprofit foundation that is expected to receive at least $100 million from the sale of additional Blue Cross assets.

The state hired outside experts to value the company and examine the sale’s impact on Montana insurance markets.

Barnes said experts placed a higher value on the purchase, and that the attorney general’s office negotiated an agreement wherein HCSC would pay $40.2 million for Blue Cross of Montana.

“Negotiations with (our) office brought the total into the fair-market valuation range determined by the independent expert, and the resulting amount is nearly three times the initial proposed price,” he said.

John MacDonald, a Helena consultant acting as spokesman for HCSC and Blue Cross, said Wednesday that HCSC needs to have the call center up and running by August and therefore needs to start on it this month.

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