Two Blue health insurers are partnering to acquire interest in one of the largest Medicaid companies in the U.S. to better serve beneficiaries in light of looming changes to the program, starting in 2014.

Independence Blue Cross (IBC), based in Philadelphia, and Blue Cross Blue Shield of Michigan (BCBSM) will offer expanded Medicaid services through Philadelphia-based AmeriHealth Mercy Family of Cos.

IBC and Detroit, Mich.-based BCBSM said they will acquire the 50% interest in AmeriHealth Mercy from Mercy Health Plan, a subsidiary of Mercy Health System, for $170 million. IBC will hold 60% of the interest, and 40% will belong to BCBSM, the companies reported in a teleconference. The transaction, expected to close in 45 to 120 days, is subject to regulatory approvals.

With big changes in health insurance expected in three years, when health reform‘s effects really take hold, health insurers are pivoting in new, potentially safer directions. However, more than 20 challenges of the health reform law, the Patient Protection and Affordable Care Act, passed in March 2010, remain for federal courts to resolve.

The board for IBC and BCBSM authorized total investment, including capital investments in the future, to be $215 million, according to Daniel J. Hilferty, president and CEO of IBC.

The two Blue companies said they will provide additional capital to support AmeriHealth Mercy’s expected growth and expansion.

IBC and BCBSM also will give Mercy Health Foundation a series of contributions over seven years, which will support Mercy Health System’s plan to deliver care and other health care initiatives.

“We think we will be increasingly attractive to states, partially as a result of this transaction, as they look to manage Medicaid heath care costs,” said Michael A. Rashid, AmeriHealth Mercy’s president and CEO, in the teleconference. “More and more, states are having Medicaid managed care programs operate their Medicaid business instead of straight fee-for-service, and with the experience that AmeriHealth Mercy has, over 25 years in this business, we think we will increasingly be successful in going after procurements.”

AmeriHealth Mercy will offer Medicaid managed care coverage and services to consumers nationwide, and to the “financially strapped” state governments that provide Medicaid coverage, according to IBC.

This agreement also will provide an opportunity for Blue health insurers nationwide to expand into the Medicaid market and take advantage of the 16 million expected to enroll in Medicaid between now and 2019.

IBC and BCBSM said at the teleconference that they want other alliances in this business agreement: They want alliances on the local state level, in which they would share 50% interest, and they want other Blue companies to buy into this Medicaid business venture.

“There are 39 Blues companies across the country, two-thirds are not now participating in Medicaid, but almost all are looking at Medicaid, I think that will also help us to win more business across the country,” Rashid said.

BCBSM historically has been in the area of 5-6% with its investment portfolio, and expects this investment will meet and exceed that, according to Daniel J. Loepp, BCBSM’s president and CEO.

About 25% of Michigan residents are expected to be eligible for Medicaid after the reforms, Loepp said in the teleconference. He added that 150,000 to 250,000 people in Michigan are expected to enroll in Medicaid before 2014, and 2.5 million after the reforms take place.

No part for independent insurance agents and brokers

There is no use for independent state brokers as far as we can see, according to Hilferty. He said the states will either recruit members themselves or hire advisors, enrollment managers who will work with different plans to bring new members into the program

“This is one of many elements of how Medicaid managed care is different than commercial insurance,” Rashid said in the teleconference.