Senate Sends Amended Blues Merger Bill Back to House

HB 112 would include "social mission" spending as part of state review

The Senate today (Tuesday, May 22) approved House Bill 112, legislation to provide state oversight of proposed mergers involving non-profit health insurance companies, and sent the amended bill back to the House for concurrence, according to Senator Don White, Chairman of the Senate Banking and Insurance Committee.

While there have been significant changes in the bill since its passage by the House on April 24, the key component of the bill (as it is with Senate Bill 550, which Senator White introduced and approved by the Senate in March) is the requirement that any merger involving the “Blues” be subject to approval by the Department of Insurance.

“This regulatory oversight is essential for policyholders and to ensure competition within the health insurance marketplace,” Senator White said. “While we have debated and revised many provisions in this legislation, the oversight provision has remained consistent throughout the process.”

While the Insurance Department would hold final approval -- or denial -- authority for a merger of non-profit health insurance companies, House Bill 112 also establishes an Insurance Restructuring Public Interest Review Board comprised of representatives from the Auditor General’s Office, the Administration, and the four caucuses of the General Assembly, as well as a policyholder to provide recommendations to the Department.

“This Board will ensure that the public has an opportunity to comment on the merger and is empowered to retain an independent financial expert to review the union. This analysis will consider the financial aspects of the merger and determine the total amount the non-profit organizations are currently dedicating to the social mission,” Senator White said.

“Funding for the social mission is a major component,” Senator White continued. “The Blues were essentially created by the Legislature in part for that expressed purpose and in turn they are excused from premium taxes and afforded other statutory advantages under Pennsylvania law.”

Once the review board submits its recommendations, House Bill 112 specifically requires the Department of Insurance to provide detailed written explanations of why a board recommendation will or will not be adopted as part of a merger approval or denial.

“The point here is that we do not want the review panel to simply be a token player in the process,” Senator White said. “This requirement is intended to prevent the Department from simply rejecting out-of-hand any recommendation from the review board without a detailed explanation.”

In addition, House Bill 112 requires the Department of Insurance to develop a written determination that the merger or consolidation will result in a sustained reduction in health care premiums. The Department’s written determination must also set forth the reasons why the transaction will be in the public interest.

“Highmark and IBC contend the merger should be approved based on the premise that it will result in savings. If so, then there must be ironclad assurances that those savings will be reflected in the short and long term,” Senator White said. “Further, any savings should not be used to support growing operations in other states or in lines of business outside of insurance. Moreover, we need to make sure these savings do not come at the cost of consumers’ accessibility to needed health care – and to the doctors, hospitals, pharmacists and others who provide that care.”

House Bill 112 also includes a specific “good government” provision that prohibits any contract or agreement between the Commonwealth and Independence Blue Cross or Highmark relating to the disbursement or spending of the proceeds from the merger or consolidation. It also prohibits any spending from the restricted receipt account except upon appropriation by the General Assembly.

“This will ensure that all dealings between the Department and the Blues are above board and beyond reproach. It would be contrary to all that we are working to accomplish if the Blues were permitted to buy state approval through any type of donation or contribution.” Senator White said.

Finally, House Bill 112 adds a new article to the Insurance Company Act that will require hospital plan corporations and professional health services plan corporations to report amounts spent on social mission and advertising annually to the Department of Insurance and the House and Senate Insurance Committees.

“It’s obvious to anyone who reads a newspaper or watches television that the Blues spend a significant amount of money on advertising,” Senator White said. “I believe it is in the public interest to review that spending as well as social mission spending on an annual basis to ensure that the Blues are properly fulfilling their intended role in the Commonwealth.”