Delaware Insurance Commissioner Karen Weldin Stewart has given Blue Cross Blue Shield of Delaware permission to become an affiliate of Highmark Inc., but she also has created a set of 49 conditions the companies must meet to consummate the deal.
Highmark, Pittsburgh, runs Blue Cross and Blue Shield plans in Pennsylvania and West Virginia with a total of 4.8 million enrollees.
Delaware Blue, Wilmington, Del., is a nonprofit health care service corporation that provides or administers coverage for 395,000 people in Delaware.
Highmark would be catching Delaware Blue on the rebound.
CareFirst Inc., Owings Mill Md. — the parent of the Blues plans in Maryland and the District of Columbia — tried and failed to acquire Delaware Blue in the 1990s. The companies formed a loose "structural affiliation" in 2000. The companies then broke up in 2006, after Delaware regulators refused to let Delaware Blue have a more formal relationship with CareFirst.
Stewart, who was elected to a 4-year term as Delaware insurance commissioner in 2008, has put tight limit on how lose Delaware Blue's affiliation with Highmark could be.
States view nonprofit companies as entities that hold their assets for the benefit of the people of the state. Insurance regulators often require for-profit buyers of nonprofit health insurers or hospitals to make large contributions to charity, to compensate the people of the state for converting nonprofit assets to for-profit use.
Stewart will require Highmark to contribute the value of Delaware Blue's assets to a foundation if it dissolves Delaware Blue.
Stewart also will require that Delaware Blue:
- Submit any efforts to transfer more than $500,000 to Highmark or a Highmark affiliate to review by Delaware insurance regulators.
- Keep its headquarters in Wilmington.
- Hold Delaware Blue employment steady, unless the company's enrollment or market share in Delaware drops significantly.
- Refrain from liquidating selling its assets, or merging with another Highmark entity.
- Contribute $500,000 per year for 10 years to health are workforce development programs, such as grants for college retraining programs for displaced workers.
- Contribute $500,000 per year for 10 years to Delaware charities.
- Join with Highmark to provide written assurances that no incentives were offered to any Delaware Blue director in connection with the affiliation.
Stewart also has set requirements for how Delaware Blue and Highmark must proceed if they ever break up.
In a statement, Delaware Blue and Highmark have welcomed Delaware approval of their deal rather than focusing on the conditions.
"The affiliation with Highmark allows us to continue as a significant local employer and contributor to the Delaware economy," Timothy Constantine, president of Delaware Blue, says.
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