Delaware’s attorney general publicly asked Blue Cross Blue Shield of Delaware (BCBSD) and Pennsylvania-based Highmark to explain the effects of their affiliation agreement.

Delaware Attorney General Beau Biden wrote the two companies a 12-page letter, now public, asking for details of the deal, announced in August 2010.

“As this process moves forward, the Attorney General’s Office has a responsibility to be a voice for Delawareans and represent the best interests of the public,” Biden said in a statement. “The proposed BCBS/Highmark transaction raises a number of serious questions regarding the quality of care to its beneficiaries, the cost of care to its beneficiaries, and the disposition of this non-for-profit’s significant cash reserves.”

Despite a separate review by Delaware’s insurance commissioner, Biden said he must pursue answers to his questions.

“We will ensure that all the necessary questions are asked and answered before this transaction proceeds,” Biden said. “The answers we requested today will help us get the

information my office needs, the law requires, and the public deserves.”

Biden asked why the proposed alliance, for which the application is not yet fully completed, is necessary and if executive incentives were part of the deal, according to the attorney general’s office.

Biden’s letter also asks what BCBSD’s cash reserves will be used for; how the deal will affect Delaware jobs; and for access to the companies’ documents related to the merger.

Biden said the 1,600 pages of documents Pittsburgh, Pa.-based Highmark, that state’s largest health insurer, filed with state insurance regulators did not explain how the deal would affect the Delaware Blue Cross’ $140 million reserves, its 630 workers or its policyholders.

BCBSD sought the deal with Highmark to acquire funds to invest in modern computer systems, according to the company. In exchange, sources to the newspaper, Highmark executives would hold three seats on BCBSD’s board and the corporation’s name would change to Highmark BCBSD.

The deal also establishes protections, allowing the BCBSD board to roll back the deal in case of certain events such as Highmark converting to a for-profit company, the newspaper said.

Delaware Insurance Commissioner Karen Weldin Stewart must approve the deal. Her decision, following a formal public hearing before a hearing examiner, is expected by early summer.

Biden also has the authority to review the deal under the law governing the conversion of nonprofits, and the attorney general’s office may review the deal under common law authority, the newspaper stated.

Gov. Jack Markell said the deal could cost Delaware jobs and regulatory oversight of the reserve built up in the state, although Stewart said the deal could produce more jobs in Delaware, better customer service and lower prices for BCBSD’s customers, according to the newspaper.

The review of the merger has been delayed because the application is not completed, the newspaper said.

Michael Houghton, a lawyer representing Stewart’s office, told the newspaper he was surprised that Biden issued a press release about the insurance department’s communications with Highmark and BCBSD, as the companies have been cooperative about sharing information, and members of Biden’s staff already corresponded with the companies without issuing information publicly.