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Pa. insurance giants want to keep a secret

Several, in fact. Independence Blue Cross and Highmark are asking the state to keep key parts of their merger out of the public eye.

The state's two largest health insurers have filed a forest of paperwork - nearly 30,000 pages of documentation as of Friday - in connection with their proposed merger.

But Independence Blue Cross and Highmark Inc. want Pennsylvania's Department of Insurance to keep key components of the merger confidential.

Here are some details the two Blue Cross plans don't want the public to know:

The locations of offices where specific functions, including sales and claims administration, will be performed - before and after the merger.

The number of people employed at those offices, both before and after the transaction.

The number of policyholders, by geographic territory and by line of business, who will be affected.

Any proposed changes to coverage and premiums, and whether current in-force policies will be renewed.

Job descriptions for each management position as well as names, titles and qualifications and how each fits on an organizational chart.

"The public disclosure of this information would cause material loss to IBC," wrote lawyer David Harbaugh, of Morgan Lewis & Bockius, for Independence Blue Cross, of Philadelphia. He described the information as "highly sensitive, confidential and proprietary."

Highmark's attorney filed a similar letter for the Pittsburgh-based insurer. Highmark also wants to be told if anyone asks for the document.

The state's biggest health insurers agreed March 28 to combine their operations, forming one of the nation's biggest providers of health coverage. Completing the merger will require the nonprofit companies to gain approvals from all the states in which they do business, including Pennsylvania, as well as the U.S. Department of Justice and the Pennsylvania Attorney General's Office.

It is standard practice for most companies involved in mergers to try to keep a lid on what must be disclosed publicly.

In this case, the two companies want to keep private the information required by the Insurance Department in a three-page governmental form titled "Business Plan for Acquisitions, Mergers and Redomestications." It seeks descriptions of the companies' organization, products, market, services and financial projections.

Because the two Blues provide health coverage for so many in Pennsylvania and employ thousands in the Philadelphia and Pittsburgh areas, this insurance merger is attracting more scrutiny than most such combinations.

"The Blues' request for keeping their plans secret from the public is a distressing sign that there may not be the needed transparency that such a major transaction requires," said health advocate Jonathan Stein, a lawyer with Community Legal Services in Philadelphia.

"I think a lot of it is basic information that the public should know," he said. "Unless the public knows, how can the public have confidence in the integrity of the review process?"

Insurance Department spokeswoman Rosanne Placey said the department had not yet decided whether to honor the Blues' request: "If a document can be proven to be proprietary, we have to keep it confidential."

The Blues say the deal will stabilize premiums and expand coverage to the uninsured. But patient advocates, doctors, businesses and others worry that it will shut out competition.

The two companies have filed a 141-page "Agreement of Consolidation" that describes some aspects of the proposed merger.

But it also includes language that raises questions. For example, the companies say they have told each other about their "off-balance-sheet special purpose entities," but those are not listed in the document. They say they have disclosed all pending litigation to each other, but no list is included. The same sort of language is used about executive compensation and tax audits.

That's not unusual, said two business law professors asked about last month's filing.

The purpose of an agreement document is not to inform the public, but to assure the parties that both sides are giving each other the needed information and to spell out the ways to end the deal, explained Rob Miller, at Villanova University.

"It looks like a fairly standard merger agreement," said Jonathan Lipson, a Temple University business law professor who is also teaching at the University of Pennsylvania.

Descriptions of litigation, compensation and audits are usually included in attached documents, simply because it's easier to handle the paperwork, he said. The level of disclosure increases if companies are publicly traded. Private businesses are not required to reveal anything, Lipson said.

"But here you are operating in this weird nether zone of a heavily regulated insurance company," Lipson said.

The two Blues are nonprofit organizations with for-profit subsidiaries.

Lipson said it made sense for Highmark and Independence Blue Cross to want to keep their financial projections and sales and pricing strategies secret, as requested.

Lipson said he could understand the Blues' argument about the proprietary nature of some of the information. For example, "the number of employees will tell their competition about their plans and something about their cost structure," he said.

The Insurance Department will have to weigh the companies' interests against the public's, particularly when it comes to questions about changes in policies, Lipson said.

"If these people are going to start cutting off the elderly or the poor, that's really important to know," he said.

For Web links and recent articles about the Highmark and Independence Blue Cross merger, go to