Elevance Health’s latest acquisition is raising questions among industry experts about whether the deal will usher in a new era of consolidation of Blue Cross and Blue Shield plans, repeating a trend from the 1990s.
Elevance, one of the nation’s largest insurers, said on Monday it plans to buy Blue Cross and Blue Shield of Louisiana in a transaction that would push the insurer into its 15th state and add nearly 2 million members to its enrollment rolls of more than 47 million people.
The deal is reminding experts of a period beginning in the 1990s, when nonprofit BCBS plans were acquired by for-profit organizations like WellPoint. WellPoint was later rebranded to Anthem following a merger between the two and recently changed its name to Elevance.
At the time, the deals faced challenges from state regulators as nonprofit plans attempted to convert to for-profit entities.
In the wake of the BCBS antitrust settlement that a judge approved in August, experts are now questioning whether it will fuel consolidation among the nonprofit BCBS plans. Prior to the settlement, the plans staked out their own markets and allegedly did not compete against one another. As part of the settlement deal, they agreed to curb some of the practices that allegedly limited competition.
There are 34 independent BCBS companies, according to the Blue Cross and Blue Shield Association.
While Elevance’s latest deal may not be considered as a significant move on its own, it may signal future BCBS consolidation, according to Dean Ungar, vice president and senior analyst at Moody’s Investors Service.
“It does suggest that we might be coming into a new era,” Ungar said.
Elevance had an existing relationship with the Louisiana plan, jointly serving Medicaid and Medicare dual eligible members and similar relationships exist in other states, said David Windley, managing director and senior equity research analyst at Jefferies.
“Could those relationships lead to transactions as well? We'd hesitate to call timing or likelihood on those, but the seeds are there,” he said.
To be sure, not all experts agree that the recent BCBS deal will lead to consolidation.
“With most Blues solidly profitable and generating surplus capital, we deem it unlikely that a new era of conversions has arrived,” said Gary Taylor, managing director and senior equity research analyst at Cowen.
While Elevance CEO Gail Boudreaux said collaborating with BCBS plans is a key part of the company’s strategy, she didn’t weigh in on potential acquisitions in the future.
The BCBS network serves nearly 115 million consumers across every state, she said.
“There are many untapped opportunities to leverage our unique scale,” Boudreaux said on Wednesday’s earnings call.
The deal will face scrutiny at both the federal and state level, antitrust attorneys told Healthcare Dive.
The acquisition will also need to secure approval from Louisiana’s insurance department, according to John Ford, a spokesperson for the agency.
The department will be required to review an application for the acquisition then conduct public hearings to “determine whether the transaction meets the standards required by law,” he said.
A number of Blue Cross and Blue Shield plans converted from nonprofit entities to for-profit plans in the 1990s. Some of those deals resulted in legal challenges and settlements at the state level.
Some states ultimately secured concessions from organizations before allowing the for-profit conversions to occur.
In Missouri, after litigation, a settlement was reached with then-attorney general Jay Nixon that allowed the conversion in exchange for cash and stock to form a foundation focused on the health of Missourians.
If a nonprofit converts to a for-profit entity, then the public is due a sum to make it whole since the organization benefited from its tax-exempt status through state corporate laws, Nixon said in an interview.
“What you're trying to do is get the nonprofit purpose that existed in your state for a number of years to continue, so that they can continue to help people,” he added.
A foundation will be formed following the recent Louisiana deal’s closure, Elevance said. The multibillion-dollar foundation, Accelerate Louisiana Initiative, will focus on improving the health and lives of the people of Louisiana, according to the company.