Ohio May Veto Chain's Buyout of Blue Cross

From Associated Press

Ohio insurance regulators will reportedly veto the proposed $299-million takeover of nonprofit Ohio Blue Cross & Blue Shield by Columbia/HCA Healthcare Inc., the nation's largest for-profit hospital chain.

The Cleveland Plain Dealer reported Thursday that the department will rule that the deal is unfair to Blue Cross policyholders. Quoting unnamed sources, the newspaper said the department could act within two weeks.

The deal is being closely watched because if approved it would be fast-growing Columbia's first major foray into the insurance business. However, it has been highly controversial.

Critics, including consumer groups and the Ohio attorney general, have argued that Columbia would be unfairly enriched by acquiring a not-for-profit company.

Blue Cross executives have also been accused of accepting a bargain price in exchange for multimillion-dollar compensation packages for themselves.

Blue Cross and Columbia say the deal would trim costs by eliminating duplication but would not cut into benefits and services.

Insurance department spokeswoman Terri Leist said no decision had been made.

Insurance department approval is required for completion of the deal, but Blue Cross would have the right to appeal.

The Plain Dealer quoted a confidential Oct. 23 report from state Atty. Gen. Betty Montgomery as saying the takeover would change Blue Cross & Blue Shield, a mutual insurance company owned by its policyholders, to a stockholder-owned venture.

Such a change typically results in policyholders getting paid in cash or stock from the proceeds of a sale.

Blue Cross spokesman William A. Silverman said the company had not seen Montgomery's opinion and would proceed with plans for the takeover.

He said the insurer had received opinions from an accounting firm and three outside law firms that differed with Montgomery's conclusions.

"We have sought analyses on the matter from a number of outside experts who assure us that this is not a de-mutualization," Silverman said.

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