Elevance, BCBSLA revive $2.5 billion merger

Overview:

  • Elevance’s $2.5 billion acquisition of Blue Cross Blue Shield of Louisiana is back on track. On Thursday, BCBSLA filed a new application to reorganize as a for-profit entity with the Louisiana Department of Insurance. Approval from state regulators and policyholders would clear the way for the merger.
  • Elevance announced the acquisition in January, but it was halted in September after Louisiana regulators expressed concerns that the merger would reduce competition and increase health care costs in the state.
  • Elevance and BCBSLA believe the new reorganization plan will alleviate these concerns and expect the transaction to close in the first quarter of 2024.

Insights:

The merger will combine Indianapolis-based Elevance, which currently operates BCBS Insurance in 14 states, with BCBSLA, Louisiana’s largest insurer with 1.9 million members. Through this transaction, Elevance seeks to expand its existing Louisiana operation called Healthy Blue. Healthy Blue is a joint venture formed in 2017 with BCBSLA that primarily serves Medicaid and dual eligible individuals.

The deal calls for BCBSLA to become a for-profit insurer and integrate its members into Elevance’s affiliated Anthem BCBS brand. Elevance and BCBSLA originally expected the merger to close before the end of 2023, but it ran into hurdles, particularly with approval from the Louisiana Attorney General and other state regulators.

Regulators and policyholders are concerned the deal could have anti-competitive effects and raise insurance premiums in Louisiana. The state also raised questions about how proceeds from the sale would be distributed among policyholders and how the nonprofit foundation created by the purchase would operate.

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BCBSLA’s new reorganization is intended to alleviate these concerns, including changes to the nonprofit’s structure called the Accelerate Louisiana Initiative. Accelerate Louisiana, which will receive the largest share (91%) of the proceeds from this transaction, will now be incorporated in Louisiana. The new proposal also narrows Accelerate Louisiana’s mission to “improve the health and lives” of the state’s residents than BCBSLA’s original proposal.

Accelerate Louisiana will be organized not as a social welfare foundation but as a trust prohibited from participating in political activities.

Additionally, the Governor of Louisiana may appoint members of the Accelerate Louisiana Board of Directors. The board would also grow to include a non-voting member appointed by the state insurance commissioner to monitor its activities.

However, key elements of the plan remain the same, including the sales price and how much of the proceeds are passed on to BCBSLA policyholders.

Elevance and BCBSLA have promised that members will not see a change in premiums or providers in their networks as a result of the merger. BCBSLA said the merger will provide it with more financial resources and flexibility to operate and expand its business in Louisiana, while also providing better member experience and benefits.

“We have invested time listening to our stakeholders to provide a transparent and seamless transaction for the Louisiana Department of Insurance and our policyholders,” an Elevance spokesperson said in a statement.

The Louisiana Insurance Commissioner and two-thirds of BCBSLA policyholders must approve the deal.

Many Blue Cross and Blue Shield plans converted from nonprofit to for-profit plans in the 1990s. But the transition has become trickier in recent years as state regulators have become more concerned about the potential for increased premiums, shrinking networks and reduced provider reimbursements.

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