Some area health insurance brokers are pessimistic about what the proposed merger of Independence Blue Cross and Highmark Inc. will mean for them and their customers.
Brown & Brown Consulting, a Philadelphia-based employee-benefits firm, surveyed 84 brokers who help small businesses with fewer than 100 employees buy health insurance for their employees.
"I think there is generally a negative opinion out there in the marketplace," said Robert Cola, president of Brown & Brown Consulting, which is a division of Brown & Brown Inc., an insurer. He said he was not surprised by the reaction.
On March 28, the boards of Independence Blue Cross, of Philadelphia, and Highmark, of Pittsburgh, unanimously voted to merge, promising decreased administrative costs, savings on drug benefits, and more help for the uninsured - all financed, they said, by the efficiencies that would come from a larger organization.
The majority of brokers are not buying it, according to the survey, which was conducted from Monday through Wednesday.
Most of them said they believed the merger would result in increased health-care costs, decreased customer service, less competition, more administrative responsibilities, and decreased agency compensation.
One factor driving the brokers' dismay, Cola said, is that Independence Blue Cross and Highmark compensate brokers differently.
In the small-business market, he said, brokers help customers analyze their needs and choose the best insurance program for their employees.
Then, they funnel their sales through a company such as Brown & Brown Consulting, which is called a general agent. The general agent actually places the order for insurance with an insurer such as Independence Blue Cross.
The Philadelphia health insurer pays brokers a percentage of each premium, Cola said. The higher the premium, the higher the broker's compensation, although brokers have been taking increasingly smaller cuts because of competition among themselves for business.
Highmark, on the other hand, pays a flat fee for each person insured, regardless of the size of the premium.
"There's a movement to go that way [in the insurance business], and that may be the cause of the uneasiness," Cola said.
The flat fee would have to be negotiated, and the combined company would be in a better bargaining position to keep that fee low, especially if competing companies were discouraged from entering the market, Cola explained.
About half of the brokers surveyed said they expected the merger to result in less competition. The new Blue will be the biggest insurance company in the state and the third-largest in the nation.
Cola does not entirely share their concern because, he said, administrative expenses are not the major influence on insurance premiums.
"What drives health-care costs is the usage of health care," he said. A relatively small percentage of sick people, combined with those who have unhealthy habits, push prices up.
"I think there is a fear of change," Cola said of the proposed merger, which must gain federal and state approval. "But I think, at the end of the day, it will be somewhat of a nonevent."