Blues Plans Highmark, HealthNow New York Announce New Affiliation

Highmark Inc. is expanding its business into New York under a proposed affiliation agreement with HealthNow New York Inc.

“Under the terms of the affiliation agreement, Highmark’s parent company, Highmark Health, will become the primary licensee of the Blue Cross and Blue Shield Association for HealthNow’s 8-county Western New York and 13-county Northeastern New York service areas, pending regulatory approvals and satisfaction of other closing conditions,” the two Blues plans announced in a joint statement on Tuesday.

Pennsylvania-based Highmark Inc. is an independent licensee of the Blue Cross Blue Shield Association and is the fourth-largest overall Blue Cross Blue Shield-affiliated organization based on membership. The organization and its Blue-branded affiliates cover more than 5.8 million across Pennsylvania, Delaware, and West Virginia.

The affiliation with HealthNow New York will increase Highmark membership to 6 million individuals once the deal closes, the Blues plans said in the statement.

“The objectives driving this affiliation are focused on our shared desire for better health solutions for HealthNow members that can increase customer and clinician engagement, create better health outcomes, manage costs and improve affordability,” said David Holmberg, chairman of Highmark. “This affiliation will also enable HealthNow to take advantage of Highmark’s resources, tools and advanced technologies.”

The affiliation agreement is unlike a typical health payer merger in the fact that no assets will be transferred. Instead, HealthNow New York will maintain its headquarters in Erie County, New York, as well as its regional office in Northeastern New York. Highmark will also maintain jobs in the plan’s market to uphold “the importance of local influence over healthcare decisions and the importance of a local market presence.”

But the agreement still underscores rapid consolidation in the health payer space.

Some of the largest healthcare mergers in the recent past involved health plans, including the merger of Aetna and CVS Health and the acquisition of WellCare by Centene. The mergers promise to offer members better access to healthcare coverage at more affordable prices. But some industry leaders fear the mergers will have the opposite effect as competition in the market declines.

The affiliation between Highmark and HealthNow New York will be “good for the people and communities we serve,” asserted David Anderson, president and CEO of HealthNow.

“Highmark has a unique business model, organized around the principles of partnership between payers and providers,” said Anderson. “In addition, Highmark has been a leader among the Blues and in the broader industry in developing new capabilities and innovative Blue Cross Blue Shield products from which our members and customers will benefit.”

Consolidation may help strengthen payer identities in 2020, according to industry experts.

“In 2020, organizations will make strategic deals not to just grow larger but instead to expand into new identities with platforms anchored in value, innovation, customer experience and population health,” experts from the Health Research Institute (HRI) at PricewaterhouseCoopers said earlier this year. “As they weigh their options, health companies will need to ensure that the deals they pursue pass the sniff test of employers and consumers seeking more affordable care.”

Forty percent of healthcare executives from across the industry—including payers, providers, pharmaceutical companies, and others—are “somewhat” or “very likely” to work with or acquire companies from other sectors of the industry in the new year, HRI found. When making these deals, 26 percent of payer executives said they would prioritize finding partners that maintain or increase their companies’ competitive advantages.