Facebook Twitter E-mail
magnify
formats

Did Blue Cross Blue Shield get Special treatment from lawmakers?

Published on June 25, 2015 by in News

By: Amy Yurkaninal_com_logo
Al.com
June 18, 2015

Gov. Robert Bentley signed two bills earlier this month that limit the ability of most insurance companies to dictate prices charged by eye doctors and dentists.

But the new laws won’t apply to the state’s largest insurance company – Blue Cross Blue Shield of Alabama – because both bills specifically excluded the non-profit company.

Michael O’Malley, executive director of the Alabama Association of Health Plans, said the exemption is a flagrant example of special treatment.

“I’ve been in the Alabama market for more than a decade,” O’Malley said. “Blue Cross Blue Shield has always been a monopoly, but this is the first time they’re acting like one.”

The association represents all the other health insurance companies in the state except Blue Cross Blue Shield of Alabama. Blue Cross Blue Shield has about 90 percent of the health insurance market in Alabama, which make the state the least competitive for health insurance, according to a study last year by the American Medical Association.

The two bills address similar issues, but one is geared toward dental practices and the other takes on optometry. The legislation keeps insurance companies from setting prices for services that aren’t covered under their plans.

To Read More

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn
formats

Cigna spurns Anthem’s $54 Billion Dollar Bid

Published on June 22, 2015 by in News

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn
formats

Cigna Says Anthem Proposal Inadequate and Not in Best Interests of Cigna Shareholders

Published on June 22, 2015 by in News

From: Cigna.com

June 21, 2015

Responds with letter to Anthem’s Board of Directors

Notes questions about Anthem’s lack of growth strategy, fundamental risks and other issues

Cigna has long track record of success

BLOOMFIELD, Conn., June 21, 2015 – Cigna Corporation (NYSE:CI) confirmed today it received a highly conditional, non-binding proposal from Anthem, Inc. (NYSE: ANTM) on June 20, 2015.

Cigna’s Board of Directors has carefully reviewed this proposal consistent with the company’s continued focus on maximizing shareholder value and creating differentiated value for its customers, clients and other stakeholders in a dynamic, rapidly-evolving healthcare environment.

Based on a number of factors in the proposal and unaddressed concerns regarding the ability to achieve the benefits of a potential combination, the Cigna Board has unanimously determined the proposal is inadequate and not in the best interests of Cigna’s shareholders. Cigna’s letter to Anthem’s Board of Directors that details these factors and concerns is included in this press release below.

Click to Read More on Cigna.com

The full text of the letter delivered to Anthem’s Board of Directors by Cigna on June 21, 2015 is included below.

Dear Members of the Board:
We have reviewed and considered with Cigna’s Board of Directors the proposal as set forth in Anthem’s letter dated June 20.Dear Members of the Board:

We are deeply disappointed with your recent actions. We have been engaged in good faith discussions with Anthem to determine whether a potential strategic combination is in the best interests of Cigna’s shareholders. A combination involving Anthem and Cigna under the right circumstances has the potential to bring together our complementary strengths in a manner that would provide substantial benefits to both consumers of healthcare services and healthcare professionals, while delivering immediate and sustainable economic returns to shareholders.

You are, however, facing a number of major issues, including Anthem’s lack of a growth strategy, complications relating to your membership in the Blue Cross Blue Shield Association (the “BCBSA”) and the related antitrust actions, and other significant challenges, such as the massive data breach you experienced in February. In fact, these fundamental issues, and your inability to address them in the context of a strategic combination, caused your management team, at your direction, to terminate our prior discussions earlier this year. We have attempted to engage in dialogue so that we can understand and consider these issues. Unfortunately, you have continued to avoid addressing these key concerns and have failed to demonstrate what has changed over the past few months. At the same time, you have decided to fundamentally alter the nature of a potential combination. Taken together, your actions have moved us off our once productive path.

Cigna’s Strong Track Record of Organic Growth

As we are sure you realize, any potential combination has to be compared to our industry-leading performance as a stand-alone company. Under the strong leadership of the Board of Directors and its management team, Cigna has a consistent track record of strong financial performance and successful shareholder value creation.

Cigna’s share price rose almost 200% in the five years beginning December 31, 2009. Anthem shares, however, significantly lagged the performance of both Cigna and the Managed Care peer group (as defined in Anthem’s most recent proxy statement) in the same period.

Of note, since implementing our “Go Deep, Go Global, Go Individual” strategy in 2009, Cigna’s Adjusted Income from Operations rose over 80% or 13% compound growth per year, while Anthem’s Adjusted Net Income declined overall and in four of the five years. In the same period, Cigna’s revenues almost doubled, delivering 14% per year compound growth, while Anthem’s grew at an anemic 3% per year. Confronted with these challenges in fundamentals, Anthem has supported its earnings per share by deploying massive amounts of capital to share repurchases, totaling over $14.5 billion since 2009 (accounting for over 110% of Anthem’s Adjusted Net Income). This approach reinforces Anthem’s lack of a growth strategy and is incompatible with sustainable long-term growth.

Governance

A successful combination requires a truly joint and collaborative approach and an appropriate risk management structure for the global combined company. Nothing of this size or scale has been attempted in our sector. In addition, a combination of our companies would be highly complex and would occur in a very dynamic and competitive environment.

Your insistence that one person (Joseph Swedish) assume four roles, including Chairman of the Board, CEO, President, as well as Head of Integration, is disconcerting and risky. We also note that Mr. Swedish has never held the position of Chairman of the Board of Anthem, and you have publicly stated that your current leadership structure allows Mr. Swedish to concentrate on overseeing the management of Anthem’s business, while Mr. Schaefer oversees the functioning of the Board and Anthem’s corporate governance. We continue to believe that a proper and balanced approach to governance and leadership is necessary to maximize the potential for value creation for the combined company. Your proposal raises very serious questions regarding your views on proper governance, board oversight and risk management and underestimates the complexity of combining our organizations.

Anthem’s Offer Is Inadequate

You have publicly stated that a transaction, on your terms, would provide greater than 20% accretion to your adjusted earnings per share within two years of closing. Your proposed allocation of shareholder value is woefully skewed in favor of Anthem shareholders.

In addition, a great deal of the value of a combination would come from successful integration and execution of a shared strategy and vision. As described above, your June 20 proposal would not allow the combined company to take advantage of the value creation benefits that would otherwise exist in a true merger, with both management teams working to achieve the full potential of a combination. Indeed, your June 20 proposal is fundamentally contrary to the entire framework that has been the basis for our discussions to date.

Taken together, these factors have led our Board, mindful of its fiduciary duties, to conclude unanimously that your most recent proposal is inadequate and not in the best interests of Cigna’s shareholders.

Fundamental Concerns

While we would prefer to have advanced our discussions, as you know, we have certain fundamental concerns relating to Anthem that remain unaddressed.

First, we have serious questions about how the combined company would comply with the intricate rules and constraints administered by the BCBSA. To date, we have not received any of the previously requested non-public agreements and rules governing the BCBSA and, accordingly, have been unable to resolve the risks associated with Anthem’s membership in the BCBSA. You have previously advised us that the revenue restrictions imposed by the rules of the BCBSA create meaningful and complicated constraints on the growth of its members, including Anthem. We have not been able to validate that a combination of Cigna and Anthem could be integrated successfully under the BCBSA rules, and the stakes are too high and the penalties too great to move forward without that validation. Indeed, you terminated certain prior discussions due to this very issue, and you have yet to adequately address our well-founded concerns.

Second, there are significant questions regarding the major ongoing antitrust litigation filed against the BCBSA and its members by subscribers and health-care providers, which litigation seeks significant injunctive relief and treble damages going back to 2008. These lawsuits, which recently survived a motion to dismiss, have enormous consequences for the BCBSA and could redefine the market for all of its member companies. Indeed, Mr. Swedish has indicated significant concerns to us about the status of the pending litigation, including the joint and several liability that may be imposed on Anthem, the largest member of the BCBSA. Given the critical nature of this litigation and the potential for value erosion to the combined company, we are concerned that you have not addressed this risk. (emphasis added by bluesantitrustlitigation.com)

Additionally, we have yet to receive answers to our questions around Anthem’s massive and highly publicized data breach that occurred in February 2015. Data protection has become both a high profile issue and a focus of the public and governmental agencies. In addition, trust with customers and providers is critical in our industry, and Anthem has yet to demonstrate a path towards restoring this trust. We need to understand the litigation and potential liabilities, operational impact and long-term damage to Anthem’s franchise as a result of this unprecedented data breach as well as the governance and controls that resulted in this system failure.

The above issues as well as others are ones that Cigna and its shareholders do not face today but would be directly exposed to in a combination with Anthem. It is simply not acceptable to avoid discussion of and attention to these issues by announcing your proposal publicly. We are also not confident in the combined company’s ability to address these and other problems without an appropriate governance framework. Despite our repeated suggestion to engage on these and other substantive matters, you have chosen to delay and avoid an open and transparent dialogue.

You have expressed frustration with the current state of our discussions. Yet during our discussions you have not provided any transparency with respect to the issues facing Anthem that we have raised and that you have previously raised as the basis for termination of our prior discussions. Moreover, instead of continuing with the constructive framework that had guided our engagement prior to June 20, you have chosen to abruptly take us off our once productive path. That is an unfortunate development given the potential for shareholder value creation that we had been exploring.

Sincerely,

Isaiah Harris, Jr.

David M. Cordani

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn
formats

Anthem Proposes to Acquire Cigna Corporation for $184 Per Share in Cash and Stock

Published on June 22, 2015 by in News

business wire

June 20, 2015

www.busineswire.com

 

 

Proposal, valued at $53.8 billion on an enterprise basis, reflects a 35.4% premium to unaffected Cigna price on May 28, 2015
• Combination expected to drive adjusted earnings per share accretion for Anthem of greater than 10% in year one, with accretion more than doubling in year two
• Anthem management confident in achievability of synergies and committed to retaining investment grade debt ratings
• Creates diversified company with greater than $115 billion in annual revenues, based on the most recent 2015 outlook publicly reported by both companies.
• Combined entity would serve approximately 53 million medical members, as of March 31, 2015, with commercial, government, consumer and specialty franchises.
• Anthem expresses frustration with and urges Cigna’s Board of Directors to drop unreasonable governance demands in light of the significant premium being offered and return to negotiations to reach a mutually agreed upon transaction.

Anthem Proposes to Acquire Cigna Corporation for $184 Per Share in Cash and Stock | Business Wire

INDIANAPOLIS–(BUSINESS WIRE)–Anthem, Inc. (NYSE: ANTM) today announced that it has submitted a non-binding proposal to acquire Cigna Corporation (NYSE: CI) for $184 per share in cash and stock. The proposed combination would create a premiere health benefits company with critical diversification and scale to lead the transformation of health care delivery for consumers. The combined company would be an industry leader with greater than $115 billion in annual revenues, based on the most recent 2015 outlook publicly reported by both companies. Together Anthem and Cigna would gain meaningful diversification covering approximately 53 million combined medical members and strong commercial, government, consumer and specialty franchises.

To Read More

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn
formats

Antitrust Lawsuits Target Blue Cross and Blue Shield

Published on May 29, 2015 by in News

By: Anna Wilde Mathewswsj

The Wall Street Journal

May 27, 2015

Blue Cross and Blue Shield health insurers cover about a third of Americans, through a national network that dates back decades. Now, antitrust lawsuits advancing in a federal court in Alabama allege that the 37 independently owned companies are functioning as an illegal cartel.

A federal judicial panel has consolidated the claims against the insurers into two lawsuits that represent plaintiffs from around the country. One is on behalf of health-care providers and the other is for individual and small-employer customers.

The antitrust suits allege that the insurers are conspiring to divvy up markets and avoid competing against one another, driving up customers’ prices and pushing down the amounts paid to doctors and other health-care providers.

The suits, which name all of the Blue Cross and Blue Shield companies as defendants as well as the Blue Cross Blue Shield Association, have already survived the insurers’ first major legal challenge.

U.S. District Judge R. David Proctor last year declined to dismiss them, saying that the plaintiffs “have alleged a viable market-allocation scheme,” which, if proven, could be an antitrust violation. Judge Proctor also said certain federal antitrust exemptions for the insurance business didn’t appear to apply to the behavior at issue in the lawsuits. The suits have moved into the discovery phase; the plaintiffs are seeking class-action status.

To Read More

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn
formats

Judge David Proctor Issues Orders in MDL 2406: In Re: Blue Cross and Blue Shield Antitrust Litigation

Published on May 27, 2015 by in News
May 27, 2015
Birmingham, AL

 

Judge David Proctor of the Northern District of Alabama issued three orders on Wednesday, May 27, 2015 in MDL 2406: In Re: Blue Cross Blue Shield Antitrust Litigation. The Orders addressed various Motions to Dismiss by certain defendants including National Account Service, LLC and Consortium Health Plans along with various other Blue Cross Blue Shield defendants. The Defendants’ motions were denied and the litigation will continue as directed by the Court.  The Plaintiffs are proceeding with the expedited discovery ordered by the Court.

To Read the Orders Please Click the Links Below:

Order Denying NAC and Consortium Health Plans Motion to Dismiss

Order Denying Various Blues Motion to Dismiss

Order Denying other Motions to Dismiss in the Provider Case

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn
formats

In suit, Blue Shield cites extravagant spending by fired executive

Published on April 27, 2015 by in News

By: Chad Terhunela times logo

LA TIMES

April 24, 2015

In suit, Blue Shield cites extravagant spending by fired executive – LA Times

ue Shield of California fired a top executive last month after he spent more than $100,000 on his corporate credit card, the company says, including on trips with girlfriend and “Sharknado” actress Tara Reid.

The details surfaced in a countersuit the health insurance giant filed Tuesday alleging fraud by Aaron Kaufman, the company’s former chief technology officer.

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn
formats

Wagons Circle On Blue Cross And Blue Shield Tax Exemptions

Published on April 13, 2015 by in News

Forbes-Logo-

 

By: Bruce Japsen

Forbes

04/06/2015

Tax exemptions of profit-making health care businesses, long controversial in an industry that is taking hold of a greater share of the U.S. economy, are coming under fire once again.

This time, it’s nonprofit health insurance companies like Blue Shield of California, which recently lost its state income tax exemption after a government audit. Though Blue Shield of California is protesting the decision of the California Franchise Tax Board, the Los Angeles Times’ Chad Terhune, who is doggedly following the story, reported that the insurer paid $63 million in back taxes to the state for 2013 and 2014.

At issue in these tax disputes generally centers on the business behavior of a health care company that has had an exemption for decades, but challenges emerge as critics see actions differing little from health businesses that do pay taxes. Tax-exempt hospitals, too, have lost income or property tax exemptions when their missions to treat the poor and uninsured don’t mesh with actions that have included overzealous bill collecting, high prices and lack of care to the indigent.

To Read More

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn
formats

Could Blue Cross Blue Shield of Alabama ever lose its tax exempt status?

Published on April 1, 2015 by in News

By: Amy Yurkanin

Al.com

03/20/2015

al_com_logoState tax regulators revoked the tax exempt status of Blue Shield of California several months ago, a rare step that could have implications in Alabama and other states because of a class action lawsuit that has been consolidated in a Birmingham court.

Blue Cross Blue Shield companies operate independently in different states, but are represented nationally by the Blue Cross Blue Shield Association. A lawsuit consolidated in the Northern District of Alabama alleges the companies conspire to decrease competition and drive up market share. The Blues then use that market advantage to amass large reserves and increase the size of executive salaries, according to the lawsuit. The original lawsuit was filed in 2012 by a Birmingham chiropractor, but has since grown to include several medical providers and Blue Cross Blue Shield affiliates all over the country.

One of the defendants is Blue Shield of California. The California Franchise Tax Board stripped that insurance company of its tax exempt status last year, according to the Los Angeles Times. California Insurance Commissioner Dave Jones told the paper Blue Shield acts like a for-profit company, echoing the argument submitted in the lawsuit. The tax board has not yet released the reasons for stripping the insurance company of its status, but the decision did follow an extensive audit of the company, according to the LA Times. Blue Shield of California has about $4.2 billion in reserves, and Blue Cross and Blue Shield of Alabama has about $2.6 billion in reserves, according to the Alabama Department of Insurance.

“There is an important relationship between what is happening in California and what is happening in our case,” said Joe Whatley, an attorney for the parties suing Blue Cross Blue Shield-affiliated insurers. “While they claim to be non-profit, they charge their insured more than they should and they pay their providers less than they should. They build up these huge reserves, more than are needed under any circumstances.”

To Read More

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn
formats

Blue Shield seeks to avoid disclosing its price for Care1st

Published on March 23, 2015 by in News

la times logoBy: Chad Terhune

LA TIMES

03/20/2015

Nonprofit insurer Blue Shield of California, already under scrutiny for its huge cash reserves and lack of disclosure, is refusing to say how much it’s spending to acquire a Monterey Park insurance company and is seeking confidentiality from state regulators..

The California Department of Managed Health Care said Friday it was still weighing Blue Shield’s request for confidentiality after receiving a public-records request from The Times and being asked to hold a public hearing on the deal by a former company official.

The documents in question pertain to Blue Shield’s proposed acquisition of Care1st, a health plan with more than 500,000 members.

The companies didn’t disclose the terms when the transaction was announced in December. They asked regulators to keep certain details out of public view in filings submitted to the state for review Jan. 30.

To Read More

 
 Share on Facebook Share on Twitter Share on Reddit Share on LinkedIn
© Whatley Kallas BluesAntiTrustLitigation