Highmark to affiliate with New York insurer

Highmark Inc., the insurance arm of Highmark Health, is expanding its regional footprint with Tuesday’s announced plans to affiliate with the parent company of BlueCross BlueShield of Western New York and BlueShield of Northeastern New York.

Under the agreement, HealthNow New York Inc., headquartered in Buffalo, N.Y., will remain locally operated but be renamed Highmark Blue Cross Blue Shield of Western New York and Highmark Blue Shield of Northeastern New York, as Highmark Health becomes the primary licensee of the Blue Cross and Blue Shield Association for those areas.

The transaction — which Highmark Health President and CEO David Holmberg said “can be transformational” — also will include HealthNow Administrative Services, with locations in Blue Bell, Montgomery County, and Sacramento, Calif., which performs third-party administrative services for more than 100,000 people.

More broadly, the affiliation further cements Highmark’s position as a dominant regional force in the insurance market, covering more than 5.6 million lives in Pennsylvania, West Virginia and Delaware.

Because both entities are nonprofit, there will be no exchange of money or assets, but the planned partnership still must undergo review by both New York and Pennsylvania state regulatory agencies.

Last year, HealthNow, with about 1 million members and 2,000 employees, reported revenues of more than $2.8 billion with $55 million in net income and $702 million in reserves.

Highmark Inc. has 6,000 employees, while its parent Highmark Health recorded $18 billion in revenue annually.

David Anderson, president and CEO of HealthNow, said it is the dominant insurer in northeast New York with a 45%-50% market share and 12% in the northeast region of the state.

In a media phone briefing Tuesday, Mr. Anderson noted the agreement — more than two years in the making — means HealthNow “will have the scale and synergy of Highmark” going forward, giving it access to both greater resources and the Pittsburgh-based insurer’s innovative products such as more varied plan structures.

“At the end of the day, size matters, particularly in health care,” he said.

Both Highmark and HealthNow officials described the agreement as a strategic rather than financial decision.

It’s one that, on this side of the state line, will particularly benefit Highmark members who reside near the New York border, said Mr. Holmberg, adding that a number of Pennsylvania-based companies also have employees in western and northeastern New York.

“We think that will be good for everybody,” he said. “These two organizations are adjacent and separated only by a state line.”

Deborah Rice-Johnson, president of Highmark, also said she anticipates the agreement could result in more, rather than fewer, jobs. “We look at it as a growth opportunity.”

Last summer, Buffalo-area media outlets reported on a

civil whistleblower lawsuit filed by a retired auditor against HealthNow who accused the insurer of overcharging school districts and governments more than $85 million.

While that suit is still pending, Mr. Anderson said state and federal authorities had investigated the charges years earlier, found no wrongdoing and issued no fines.

“We believe it has no merit,” he said of the civil suit.