Nonprofit Insurance Merger Conditional on Jobs and Taxes

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April 19, 2013; Billings Gazette

Montana State Auditor Monica Lindeen and Attorney General Tim Fox will likely approve a merger between Blue Cross and Blue Shield of Montana and Health Care Service Corp. of Chicago, but the approval comes with strict conditions, among them the requirement to pay “premium taxes” to the tune of $12 million per year. 

HCSC, the fourth-largest health insurer in the nation, is offering $40.2 million to buy Blue Cross, which has 250,000 customers. This makes Blue Cross the largest insurer in Montana, but they still apparently felt that they needed additional capacity to make the changes required by the ACA.

HCSC made approximately 100 times the revenue of Blue Cross last year.

According to the Billings Gazette, the conditions include the following:

  •        HCSC will create 100 new jobs in Montana by the end of 2016 and will keep all Montana Blue Cross employees at their jobs with current or greater pay.
  •        The new company will keep its administrative costs and profit margin in Montana lower than Blue Cross’ current costs and margin.
  •        HCSC will pay premium taxes in Montana. (Blue Cross, which has been a nonprofit insurer in Montana, has not paid premium taxes.)
  •        HCSC will match Blue Cross of Montana’s past charitable giving for the next three years and contribute an additional $3 million to foundations that fight childhood obesity and support dental care for children. The company also will create a “vaccination van” to offer at least 2,000 free vaccinations in underserved areas of Montana, including Indian reservations.
  •        HCSC will make public the salaries of its five highest-paid executives in Montana. Blue Cross’ executive salaries had been public information, but HCSC had indicated last week that it might not continue that policy.

—Ruth McCambridge