Dive Brief:
- Elevance Health and Blue Cross Blue Shield of Louisiana have paused their $2.5 billion merger following criticism from state regulators that it could reduce competition and raise healthcare costs in the state.
- Political pressure has been building to delay the deal, with Louisiana Attorney General Jeff Landry calling for a stay in the approval process last week.
- Elevance and BCBSLA said they’re withdrawing the merger to “provide more time for key stakeholders to understand the benefits this transaction will provide” in a statement to Healthcare Dive.
Dive Insight:
The merger, first announced in January, would marry Elevance, which currently operates BCBS plans in 14 states, and BCBSLA, the largest insurer in Louisiana with 1.9 million policyholders.
Through the deal, Elevance is angling to expand its existing Louisiana business, called Healthy Blue, a joint venture formed in 2017 with BCBSLA that primarily serves Medicaid and dual-eligible individuals.
The deal would require BCBSLA to become a for-profit insurer and fold its members into Elevance’s affiliated Anthem BCBS brands. Elevance and BCBSLA originally expected the merger to close before the end of 2023, but have hit snags receiving the regulatory green light.
Landry — the current Republican front-runner in the Louisiana governor’s race — has been investigating the deal for potential antitrust violations, citing concerns about impact to premiums. Landry and other state regulators have also raised concerns about how proceeds from the sale will be split between policyholders and how the nonprofit foundation created by the purchase will operate.
Two reports commissioned by Insurance Commissioner Jim Donelon earlier this summer called into question how Blue Cross plans to structure the deal and divvy out sale proceeds between policyholders and the foundation.
By law, Donelon, along with two-thirds of BCBSLA policyholders in Louisiana, are required to approve the deal.
For their part, Elevance and BCBSLA have pledged that members won’t see a change in premiums or providers that are in network as a result of the merger.
But “since we are committed to making sure these questions are answered, BCBSLA and Elevance Health do not believe it is the right time to hold public hearings and a policyholder vote,” the payers said in their statement on the merger’s withdrawal.
BCBSLA and Elevance said they “remain committed” to refiling the reorganization plan and acquisition application, but did not share a timeline for doing so.
Converting nonprofit to for-profit plans has become tricky due to souring sentiment from state regulators over concerns like higher premiums, narrower networks and lower provider reimbursement, TD Cowen analyst Gary Taylor wrote in a Tuesday note.
A number of Blue Cross and Blue Shield plans converted from nonprofit entities to for-profit plans in the 1990s. But attempted conversions were blocked by a number of states in the mid-2000s, including Kansas, Maryland, North Carolina and Washington, according to Taylor.
“With most Blues profitable and sitting on enormous surplus capital, we deem it unlikely that a new era of conversions has arrived,” Taylor noted.
