BLUE CROSS: Illinois-Texas Merger Gets Approval

      In a deal that has raised questions nationally about "whether nonprofit health plans could merge or convert to for-profit entities," a Texas judge yesterday ruled that "Blue Cross and Blue Shield of Texas can legally merge with" Blue Cross and Blue Shield of Illinois, the Dallas Morning News reports. The deal would create the "second-largest Blue Cross company in the country," with $6.5 billion in revenues and 4.4 million enrollees. Texas Attorney General Dan Morales (D) had sued to block the merger, arguing the deal "was a deceptive get-rich-quick scheme that would harm the residents of Texas." Lawyers for the state argued the merger would allow Texas Blue Cross "to breach its charitable mission and divert hundreds of millions of dollars in assets to out-of-state policyholders." In rejecting the lawsuit, Travis County District Judge Hart wrote that Texas Blue Cross "has never functioned as a charity," and that it "operates only for the benefit of its policyholders, not the public at large." Further, he noted, "[i]t charges market, competitive prices for its product. It does not provide gratuitous insurance benefits to anyone." The Texas Blue is a nonprofit insurer, while the Illinois plan is a mutual insurer "owned by policyholders who are eligible to share any profits generated by the plan." Under the deal, the Illinois Blues will control the assets of the Texas plan "and could distribute that money to its members."

The Arguments
      Texas Blue Cross had argued it was never a charity and that the "proposed merger would benefit policyholders in both states by lowering premiums and increasing efficiency." Ward Tisdale, a spokesperson for the state attorney general, said, "We're disappointed, but we gave it our best effort. We took the pro-consumer position." He said no decision had been made on whether or not to appeal the ruling. Consumer groups also "slammed" the ruling. Lisa McGiffert, a senior policy analyst for Consumers Union, said, "The people of Texas are getting robbed of their charitable assets. This court went to great lengths to allow a private corporation from Illinois to get rich off the public dollars that belong to the people of Texas." However, William Parrish, a lawyer for Blue Cross, said, "Their money is not going to disappear to Illinois." The Dallas Morning News reports the deal must still be approved by the Texas insurance commissioner (Ornstein, 2/13).