Health Care Service Corp. doesn't grow haphazardly. In fact, the nation's fourth-largest insurer adds new nonprofit Blue Cross and Blue Shield plans at a snail's pace compared to for-profit insurance competitors.

Already the owner of two of the nation's largest Blue plans (Texas and Illinois), HCSC recently announced a planned affiliation with Blue Cross and Blue Shield of Montana, its first new Blue plan addition since it added Blue Cross and Blue Shield of Oklahoma in 2005. With the mergers and acquisitions flurry that has followed the healthcare reform law, making a move into a state with fewer than 1 million total residents might seem odd.

But HCSC gains at least two obvious advantages in combining with the Montana Blue plan. First, it gives the company about half of the fully insured market in the state through the Montana plan's 250,000 covered lives (HealthLeaders-InterStudy data). Second, the combination will make for an easy pharmacy lives transfer as the Montana Blue plan along with HCSC affiliates owns Prime Therapeutics, the pharmacy benefit management company. The PBM serves members of 13 nonprofit Blue plans. Once the affiliation between the Montana Blue plan and HCSC becomes official, pharmacy benefits will continue without a hitch.

Joint ownership of Prime Therapeutics could create a path toward easy consolidation among Blue plans. The PBM itself has become more of a force in the industry as the PBM market consolidates; the North Carolina Blue plan switched to Prime last year.

The Montana move also signals that HCSC may be behaving like its for-profit counterparts in more ways than M&A activity. For Medicare Advantage's 2013 open enrollment, all four Blue plans stepped back into the market with a lineup of HMOs in Illinois and local PPOs in Texas and New Mexico. HCSC also expanded into Medicaid in Texas and bid on business in other states.

Nevertheless, the deal doesn't signal HCSC becoming the mutual version of WellPoint. A decade ago, HCSC and the Regence Group in the Northwest called off a planned affiliation. Not every nonprofit Blue plan would fit with an HCSC affiliation; only a few independent Blue plans might make sense.
But opportunities to bring more nonprofit Blue plans into the fold remain, and HCSC won't be idle as the nation's largest carriers swallow up smaller competitors.

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