Blue Care Network offers to buy health plan group on mid Michigan : Christina Rogers
By: Health Insurance
Submitted: 2009-09-21 11:20:35 | Word Count: 649
Looking to expand its footprint in central Michigan, Blue Care Network announced Tuesday it's struck a deal to buy the 80,000-membership Physicians Health Plan of Mid-Michigan for an undisclosed figure from Sparrow Health System in Lansing.
The transaction will require approval from state insurance regulators and health department officials, but Blue Care Network hopes to finalize the sale by the year's end. Until then, Physicians Health Plan members will see no changes to their insurance or medical service.
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Blue Care Network is a health maintenance organization or HMO owned by the state's largest health insurer, Blue Cross Blue Shield of Michigan, which covers about 628,000 members statewide. Physicians Health Plan, which was founded by Sparrow Health System in 1980, has a provider network of 11 hospitals and more than 1,300 doctors.
Blue Care Network, which posted a surplus of about $70.2 million last year, plans to use the subsidiary's reserves to buy the health plan from Sparrow, and insists no money from its parent organization will be used to make the purchase.
Additionally, it will acquire several Physician Health Plan subsidiaries, including a Medicaid HMO with about 18,000 members. Officials with the HMOs wouldn't disclose the sale price while the purchase is pending. It's uncertain how the sale will affect the 132 employees now working at Physicians Health Plan.
If approved, this will be Blue Care Network's second acquisition in the last three years. In 2006, it bought MCARE for $240 million from University of Michigan Health System, adding about 200,000 customers to its membership based.
Blue Care Network officials touted the deal as a win for its members as well as those carrying Physicians Health Plan cards.
Jeanne Carlson, CEO of Blue Care Network, said the acquisition will spread administrative costs across more members and generate savings needed to keep premiums low. Physicians Health Plan subscribers will benefit from a larger provider network and out-of-state coverage through Blue Care Network affiliates, Carlson added.
Some health insurance leaders aren't so sure.
Rick Murdock, president of the Michigan Association of Health Plans, said the sale could further erode competition in central Michigan and ultimately drive up insurance prices for consumers lacking choice. Blue Cross already has a strong market presence in the region and the acquisition would only further strengthen its foothold, Murdock added.
Attorney General Mike Cox also questioned the timing of the purchase, given that the insurer's parent company is raising rates on many existing customers.
"Could these funds have been used instead to help avoid rate increase on struggling Michigan residents?" asked Cox, a Republican candidate for governor, in a released issued in response to the announcement Tuesday. "Until that question is answered, I will remain skeptical."
Blue Cross and its subsidiaries have spent more than $350 million buying other companies since 2005. However, during that same period, Blue Cross has claimed millions of dollars in losses and asked for rate increases on multiple lines of health insurance.
Blue Cross officials, however, maintain the purchase represents an investment that will help strengthen the insurer's ability to provide affordable coverage. It's a strategy that's helped reduce monthly premiums in the past for the insurer, they noted.
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