Highmark resists state review of Blues competition

The Pittsburgh-based plan is objecting to requests for information by the Dept. of Insurance that the company believes go beyond what's allowed by law.

By — Posted Feb. 11, 2010

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Highmark, Pennsylvania's largest Blues-affiliated insurer, is resisting an information request from the state insurance department on the grounds that the state is exceeding its authority as it conducts a review of the business affairs of the state's four Blues plans.

The state is conducting formal market conduct examinations to investigate whether the Blues might be violating unfair trade practice laws.

"Highmark has voiced concerns to the Pennsylvania Insurance Dept. that the examination, as currently proposed, exceeds the scope of the department's legal authority -- both in the matters being examined and the documents being requested," Highmark spokesman Michael Weinstein said in an e-mailed statement.

The requests for information from Highmark are part of a state inquiry into the way the Blues operate and compete. The review was announced shortly after a proposed merger of the two largest Blues plans, Pittsburgh-based Highmark, which operates Blue Shield-marked plans, and Philadelphia-based Independence Blue Cross, fell through early in 2009.

The commissioner's plan to conduct market conduct reviews of the Blues plan was welcomed by the Pennsylvania Medical Society.

It's unclear how long Highmark's reticence would stall the review.

Weinstein said Highmark "continues to discuss these issues with the insurance department with the goal of working toward a resolution."

Insurance department spokeswoman Rosanne Placey declined to comment on discussions with Highmark or when the review might be complete.

Independence spokeswoman Ruth Stoolman said the company has been cooperating with the investigation, but also said, "We're discussing things like the scope and volume of information, and the discussions are going to continue."

Spokesmen for Blue Cross of Northeastern Pennsylvania, based in Wilkes-Barre, and Harrisburg-based Capital BlueCross said their respective companies have cooperated fully with the state's review.

Weinstein said Highmark not only objected to the scope of the state's inquiry, but "also has raised concerns about the objectivity of the examiner and other consultants that the department intends to use during the exam."

The department has retained the Philadelphia-based law firm of Hangley Aronchick Segal & Pudlin for legal expertise and consultants at California-based LECG for assistance with the economic aspects of the review, Placey said.

LECG was among the firms the insurance department hired to analyze the potential anticompetitive effect of a merger of Highmark and Independence Blue Cross.

After a 21-month regulatory review of the proposed merger, Pennsylvania Insurance Commissioner Joel Ario made clear he would approve the deal only if one company gave up its Blues trademark. Highmark and Independence withdrew their application to consolidate.

"Our concern was that some of the consultants were the same as the ones used during the Highmark-Independence Blue Cross consolidation review process and so they may not bring an objective perspective to this review," Weinstein said.

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