Delaware’s insurance commissioner approved the affiliation between Blue Cross Blue Shield of Delaware (BCBSD) and Highmark, imposing 49 conditions designed to protect consumers and BCBSD.

Karen Weldin Stewart

A key provision of the approval is that Blue Cross Blue Shield of Delaware will remain a separate, Delaware-based non-profit health service corporation. Under the arrangement, BCBSD will share in the financial strength and administrative functions of the much larger Highmark, a Pittsburgh-based carrier serving Western and Central Pennsylvania.

After 14 months of deliberation, Insurance Commissioner Karen Weldin Stewart said that the state will benefit from the affiliation, which is expected to bring expanded research and development of new products, “prompt” payment of claims, enhanced technology interface, regulatory compliance improvements and immediate access to professional expertise.

“I have watched with great concern as Blue Cross Blue Shield of Delaware and other small health insurers have struggled to compete with large national insurers who have billions of dollars of capital and resources,” Stewart said. “These small companies have limited ability to make the changes required by today’s health care reform.”

BCBSD will have access to Highmark’s capabilities, including enhanced customer services such as online provider cost information and wellness programs. Physicians and hospitals will see real-time claims estimation and adjudication capabilities, BCBSD reported.

“The affiliation with Highmark allows us to continue as a significant local employer and contributor to the Delaware economy,” said Timothy Constantine, president and CEO of BCBSD, in a statement. “We expect the transition to our new structure will be seamless. Our current relationships with customers and providers will remain the same and our employees will continue to provide the high-level local service that our customers and providers expect.”

BCBSD, the largest heath insurer in the state, has been looking for an affiliate since 2006, when it was forced to terminate its six-year-old affiliation agreement with Owings Mills, Md.-based CareFirst, Maryland’s largest health insurer.

Stewart’s approval occurred within days of the two-year anniversary of Highmark abandoning its proposed merging with Independence Blue Cross, a Philadelphia-based Blue Cross affiliate. The deal died when then Pennsylvania Insurance Commissioner Joel Ario indicated to the companies that he would force them to abandon either their Blue Cross or Blue Shield service mark if they were to complete the merger. Both companies balked, ending the deal.

The 49 conditions

Stewart approved the Highmark-BCBSD affiliation after adding 49 conditions, she said, to protect BCBSD and Delaware consumers. Stewart said the conditions include:

• BCBSD will remain in Delaware, and the people that Delaware subscribers interact with also will remain.
• The board will include independent Delaware residents who have lived in the state for at least five years and are not employees of BCBSD, Highmark or any of its affiliates. The board will have “substantial” influence over the operations of the company, Stewart said at the conference.
• The assets and reserves of BCBSD will be fully protected and can be used only for the benefit of BCBSD or its members.
• The community contributions that BCBSD made in the past will continue, and may be expanded in some cases.
• All operations will remain under the direct regulatory control of the Delaware Insurance Department.

On Dec. 29, Stewart said she also approved a condition to make Delaware’s Children’s Health Insurance Program (CHIP) affordable to families slightly above the federal poverty level. BCBSD agreed to add $3 million to its commitment to subsidize the CHIP program until June 30, 2014, or until the federal program goes into effect.