HELENA — Blue Cross Blue Shield of Montana, the state’s dominant private health insurer, announced Monday it will be bought by the fourth largest health insurance company in the nation — yet still remain as a nonprofit firm with a state focus.
Blue Cross said it will become part of Health Care Service Corp., a coalition of Blue Cross/Blue Shield plans in Texas, Illinois, Oklahoma and New Mexico. The company, headquartered in Chicago, has more than 13 million customers.
Montana’s Blue Cross plan is the largest private health insurer in the state, with about 270,000 “members,” or customers.
Mike Frank, president and CEO of Blue Cross Blue Shield of Montana, said becoming part of Health Care Service Corp. will bring with it the benefits of a large-scale firm, such as having access to “cutting-edge” technology and more financial resources.
“We think there could be tens of millions of dollars that we might need to spend on technology,” he said, “(Health Care Service Corp.) has a state-of-the-art claims processing system; they’ve put $2.4 billion into technology in the last decade. … With just $128 million of reserves (for Blue Cross of Montana), it makes it very difficult for us to come up with that kind of money.”
For example, Health Care Service Corp. is developing and using mobile applications, whereby customers or providers use their smart phones, computer tablets or other mobile devices to interact with the insurer, Frank said.
Frank said the joining of the two companies will not cost any jobs in Montana, where Blue Cross employs about 520 people. Blue Cross employees here will become employees of Health Care Service Corp., but the Montana company will keep its name, he said.
Frank also said he doesn’t anticipate any immediate changes for Blue Cross customers.
The transaction, not yet complete, must be reviewed by the Montana attorney general and the state auditor’s office, which regulates insurance.
Lucas Hamilton, spokesman for state Auditor Monica Lindeen, said Monday that neither company had filed any formal proposals with her office, so it was difficult to say what approvals would be needed.
Frank declined to say how much Health Care Service Corp. is paying for Blue Cross, and that those details had yet to be made final.
Blue Cross and Health Care Service Corp. officials, including President and CEO Patricia Hemingway Hall, met Monday afternoon with Gov. Brian Schweitzer, who queried them about the companies’ plans and their effect on Montana consumers.
Schweitzer said the transaction may change Blue Cross to a “mutual benefit company,” which would require the firm to pay premium taxes to the state of $10 million to $12 million a year. He also asked whether the conversion was one step toward making Blue Cross a for-profit company, with big benefits or payouts for the executives.
Hall said Health Care Service Corp. has no plans for any such conversion and believes in the nonprofit model for its companies.
“What we are very committed to is a sound, solid, not-for-profit Blue system that can continue to compete in this world that we’re facing,” she said. “The marketplace is changing; the competition is more than it’s ever been.”
Blue Cross of Montana can’t hope to compete against firms with millions of members, when it has just 272,000, she said.
Hall and Frank also said the market is changing, with more emphasis on selling insurance directly to individuals. The new federal health reform law requires Americans to have health insurance by 2014, and many will have to buy it.
However, Frank said the Affordable Care Act wasn’t the main impetus behind the sale.
In an interview Monday, Frank said Blue Cross of Montana began looking at its longer-term strategy earlier this year, and decided the best course would be to join up with other Blue Cross plans.
Also on Monday, a major subsidiary of Blue Cross — Western States Insurance — announced it will be purchased by the Payne Financial Group. Both firms are headquartered in Missoula. The company’s new name has not been released.
Terms are confidential and no changes were immediately announced for staffing of offices.
“This agreement instantly deepens the resources and service available to our clients while strengthening our position in the insurance marketplace,” said Payne Financial’s chief executive and president Brian Donahue.
The two companies employ 650 people at 40 offices in 30 cities in Montana, Idaho, Oregon and Washington State. The merger is expected to be completed by the end of 2012.
Projected revenues for both insurance companies this year are $90 million.
Hoiness LaBar was formed in Billings in 1921. In January 2001, Hoiness LaBar, Montana International of Helena and portions of Terry Payne & Co. of Missoula merged to form Payne Financial.
Gazette reporter Jan Falstad contributed to this report.