NU Online News Service, Aug. 15, 8:46 p.m. – Two major Blue Cross and Blue Shield companies have called off plans to combine their companies through a process called “affiliation.”

Health Care Service Corp., Chicago, and The Regence Group, Seattle, say they have withdrawn applications asking state regulators to approve the affiliation.

Health Care Service, a policyholder-owned mutual insurer, is the parent company of the Blue Cross and Blue Shield companies in Illinois, Texas and New Mexico. It covers 7 million people and brings in $12 billion in annual revenue.

Regence, the nonprofit parent of the Blues companies in Oregon, Washington, Utah and Idaho, covers 3 million people and generates $4 billion a year in revenue.

When the companies announced their affiliation plans in August 2000, they said the deal would help them cut administrative costs by consolidating back-office operations.

“The original objectives of a larger affiliation are sound,” Regence Chairman Dick Woolworth and Health Care Service President Ray McCaskey said in a statement announcing the break-up. “But a recent assessment raised substantial doubts that the objectives would be met.”

The companies made the decision to break off affiliation talks “amicably,” the executives said.

Health Care Service and Regence announced the break-up shortly after Oregon and Washington insurance regulators scheduled a public hearing on the deal. (See http://www.nunews.com/lifeandhealth/hotnews/viewLH.asp?article=8_15_01_11_2320.xml)

Last spring, the companies faced complaints from health activists in the San Francisco office of Consumers Union. The activists argued that Regence should compensate Oregon, Washington, Idaho and Utah for the deal, because the deal would shift control over charitable assets held in trust for the people of those four states to a company based in Illinois.

Regence and Health Care Service insisted the affiliation would be an affiliation of equals, not a takeover by Health Care Service.