Blue Cross Michigan, Vermont propose affiliation


Blue Cross and Blue Shield of Vermont aims to join with Blue Cross Blue Shield of Michigan via a non-cash exchange in a deal the nonprofit companies contend will improve care and lower costs.

Under the proposed agreement, the Michigan insurer will acquire the Vermont company’s coveted Blue Cross and Blue Shield license, said Lynda Rossi, executive vice president of strategy, innovation and public affairs at Blue Cross Blue Shield of Michigan. “You’re going to see further consolidation in the market,” Rossi said. “The model that we jointly built with the Vermont plan is going to be very attractive within the Blues system.”

Operationally, the deal resembles an acquisition except that no money will change hands. The Michigan and Vermont operations will maintain separate headquarters, boards of directors and workforces, along with their legal entities in the two states. The companies’ boards of directors have approved the agreement.

The parties aim to close the deal by Oct. 1, Rossi said. Together, the companies would have approximately 5.4 million members. The affiliation requires approval from Michigan and Vermont regulators.

In exchange for the license, Blue Cross and Blue Shield of Vermont intends to use the Michigan company’s operational and technology services to develop a smartphone app for members, enable online bill paying and create digital wellness programs, among other things, said President and CEO Don George.

“There’s an awful lot that can be made available through healthcare technology, and it’s really taking off,” George said. “But it requires investments and it requires expertise that’s just prohibitively expensive to do on a small size and a small scale. For us, this makes perfect sense.”

Blue Cross Blue Shield of Michigan has the largest market share in its home state and covers approximately 5.2 million individual, Medicaid, Medicare and employer members. The company controlled 68% of Michigan’s commercial market and 49% of its Medicare Advantage market in 2021, according to the American Medical Association’s most recent report on health insurance competition.

Blue Cross and Blue Shield of Vermont is the state’s only nonprofit carrier and has approximately 225,000 commercial and Medicare members. The company held 53% of the state’s commercial market share in 2021, according to the AMA, which did not include the insurer’s Medicare Advantage market share in its report. The company launched a jointly branded Medicare Advantage product with Blue Cross Blue Shield of Michigan in 2021, and already uses the Michigan company’s claims processing system.

Nonprofit health insurance companies such as these face stiff competition from large, national rivals such as UnitedHealth Group, CVS Health and Humana, and some are seeking to gain advantage through partnerships.

Kaiser Permanente’s Kaiser Foundation Hospitals and Geisinger Health plan to team up via Risant Health, a new entity the integrated health systems announced on Wednesday. In February, nonprofit insurers Health Alliance Plan and CareSource formed a joint venture to offer new Medicaid and exchange offerings in Michigan. SCAN Health Plan intends to acquire nonprofit carrier CareOregon to create a $6.8 billion company named HealthRight Group, which will focus on government health programs, the company announced in December.


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