Tuesday, 10 April 2007
Independence Blue Cross And Highmark Talk Merger; Brokers Worried
Independence Blue Cross of Philadelphia and Highmark Incorporated of Pittsburg have announced their intention to merge, a move that would create the third-largest health insurer in the country. The two non-profit companies said the merger would help reduce many costs, saving members millions of dollars.
“By combining our two organizations, we will be better able to maintain affordable programs, meet shifting customer demands for new products and fund essential technological and infrastructure improvements in the face of challenges from much larger, for-profit out-of-state health insurance companies,” said president and chief executive of Independence Blue Cross, Joseph Frick.
The proposed merger has made some insurance brokers wary. The merger could increase costs, hurt competition, create more administrative work, shift focus away from customer service, and have a negative impact on their business.
If the two insurers are allowed to merge, barring federal and state approval, they would control more than half of Pennsylvania’s health insurance market.
One particular concern that brokers have is the disparity between the two companies’ methods of compensation.
Independence Blue Cross pays brokers and agencies a percentage of a policyholder’s premiums — the higher the premium, the higher the percentage paid to agents. Highmark pays a flat rate to agents, regardless of the premium.
“There’s a movement to go that way [in the insurance business], and that may be the cause of the uneasiness,” said president of Brown & Brown Consulting, Robert Cola.
Brokers are worried if the flat rate policy is adopted, the fees would have to be negotiated and the merged company would be in better position to set the fees lower, reports the Philadelphia Inquirer.
But Cola acknowledges that brokers’ concerns may not be anything to worry about.
“I think there is a fear of change,” Cola said. “But I think, at the end of the day, it will be somewhat of a non-event.”
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