Would an Anthem-HCSC Merger Impact North Texas?

With the departure of two top leaders at Illinois-based Health Care Services Corporation, which owns Blue Cross Blue Shield of Texas, some have speculated about a merger between Anthem, which operates BCBS programs in New York, California, and other states, and HCSC.

“We live in interesting times and conventional strategy and timid tactics have gone by the wayside,”writes Britt Berrett, former President of Texas Health Presbyterian Hospital Dallas and current UT Dallas professor. “The future will be filled with bold and innovative ideas. HCSC will most definitely pursue a more aggressive and innovative path and Anthem may be part of their story.  The seemingly insurmountable obstacles will pale in comparison to the impending changes that they will most certainly experience.”

Forbes reports that former HCSC CEO Paula Steiner was in conflict with the board because she wasn’t thinking aggressively enough about the future, despite record profits for the insurer. The merger would have significant legal hurdles, as Anthem is a for profit  publicly traded company and HCSC is a non-profit mutual insurance company owned by policyholders. It would combine Anthem, the second largest insurer in the country, with HCSC, the fourth largest, according to Forbes.

Anthem’s current President and CEO Gail Boudreaux used to be an executive at BCBS of Illinois, which is part of the HCSC organization. The connection intrigues Berrett, but he doesn’t think there will be much impact on BCBS’ service here in Texas. “The HCSC deal may not impact Blue Cross Texas today, but get ready, we are going to see some dynamic changes in healthcare and the involvement of some more unique and different bedfellows,” writes Berrett.

“HCSC’s board of directors and new leadership intend to pursue a more forward leaning long term strategy, while continuing to help our members access quality, affordable health care,” HCSC said in a statement to Forbes, adding that they “won’t speculate about its strategy or future plans.”

Because there is no geographic overlap between the two Blue Cross operators, a merger would be unlikely to change much about their work here in Texas. But the emphasis on growth for insurers and health systems is certainly at play. “There seems to be almost a frenetic race among provider organizations to get bigger through both horizontal and vertical consolidation, in my opinion in an effort to grow and preserve market share and exercise pricing power,” says John McCracken, Clinical Professor of Healthcare Management at UT Dallas. “A proposed HCSC-Anthem merger might be a visceral reaction by the leadership of these two organizations that they too need to join the march to organizational bloat. I think this is a trend the FTC should have stopped long ago, but it’s too late now.”

A merger would add to the continued industry moves, which include CVS Health’s acquisition of Aetna and Cigna’s purchase of Express Scripts. UnitedHealth Group has purchased providers all over the country, and Blue Cross Blue Shield of Texas has plans to open up several of its own clinics around the state.

Blue Cross Blue Shield of Texas did not have a comment on the potential merger. Read the full Forbes story here.