Tangled in Blues

TRENTON, N.J.: Blue Cross-Blue Shield of New Jersey announced Wednesday that the company will merge with Indianapolis-based Anthem Inc., one of the nation's largest health insurers. The deal is the latest move by the Blues to keep their footing amid health care's rapid consolidation and adoption of managed care. "The shift to managed care is driven by employers," says TIME's Janice Castro. "And Blue Cross companies, often among the most hidebound and outmoded health-care providers of all, are trying to find a way to compete with all these more efficient organizations." Blue Cross-Blue Shield of New Jersey is betting that an alliance with Anthem, a $5 billion a year company that covers about 9 million people nationwide, will help it improve its marketing capability and widen its medical networks in the face of the rigorous competition from other insurers. Anthem already includes Blue Cross and Blue Shield plans in Indiana, Ohio and Kentucky. The New Jersey Blues agreed to acquire Blue Cross-Blue Shield of Delaware on May 21, raising their combined number of customers to 2.1 million. It is not clear whether New Jersey Blue Cross and Blue Shield, a non-profit company, will have to convert to for-profit status. If it does, it must turn over millions of dollars to health care foundations as compensation for the special privileges the Blue Cross plans have traditionally received in exchange for serving as insurers-of-last-resort for the disadvantaged. "The main advantage of converting to for-profit status is that the plan can raise money in the markets for expansion, effectively buying market share," says Castro. "If it does, Anthem will probably bring in new management that understands how to run efficient and accountable systems." -->