The Pennsylvania Insurance Department is looking at the state’s four Blue Cross Blue Shield companies to determine whether they engaged in any anti-competitive or unfair trade practices, a move two of the insurers said left them “disappointed.”

Insurance Commissioner Joel Ario announced the investigation in light of the attempted merger between Pittsburgh-based Highmark Inc. and Philadelphia-based Independence Blue Cross. The withdrawal of the proposed merger by the insurers “was good news for consumers,” he said, “but did not improve the anti-competitive dynamics that remain at play in Pennsylvania’s health insurance marketplace.”

Following the withdrawal of the merger proposal, Ario said he would have denied the action given that it would have created too much control of the marketplace by one entity and that he would like to see more Blue on Blue competition in the state.

As part of their examination, due to be completed in early 2010, the department will look at several issues. They include whether there are other agreements among the Blues that impede rather than promote competition; whether the Blues use their market power for an unfair or anti-competitive advantage in areas such as provider contracting and product tying; and whether the territorial restrictions in the Blues’ licensing agreements are anti-competitive.

In the latter issue, there are competing Blue licenses in three of Pennsylvania’s four regions, as well as evidence that Blue on Blue competition has benefited consumers and enhance the Blue brand in the central region, according to Ario’s office.

“If we discover competitive problems that do not violate current law, an outgrowth of this process could be recommendations for statutory changes to promote more competition in the Pennsylvania health insurance marketplace,” Ario said.

Judimarie Thomas, senior director of corporate and public affairs for IBC, told IFAwebnews.com that the insurer is “deeply disappointed” by the examination and “the questions it raises about our business practices.”

“We welcome competition, we have always faced competition, and we continue to have intense competition today in southeastern Pennsylvania,” Thomas said.

She added that the department’s examination “diverts attention from improving the quality of health care and addressing the factors that are raising the cost of health care and health insurance,” including higher priced technologies and expensive new treatments and drugs, and that the scope of the examination is “troubling.”

“The scope of the examination is also troublesome. A through analysis of competition by the department would include all health insurers in Pennsylvania,” Thomas said.

In a statement, Highmark said it was also “extremely disappointed” in the examination that they felt would  “impose substantial costs on the Blue Cross and Blue Shield companies – and therefore, on our customers – at a time when individuals and businesses are being challenged to meet expenses in a difficult economy.”

“While Highmark will cooperate with the examination process and respond to the Department’s information requests, we continue to believe that substantial competition exists in Pennsylvania’s regional health insurance markets,” the insurer’s statement read. “We submitted thousands of pages of documentation to support this point during the review process for Highmark’s proposed consolidation with Independence Blue Cross.”