A broadened version of a bill that would bolster the regulation of mergers of health insurers moved ahead in the legislature last week, even though Gov. Rendell has threatened to veto it.

The legislation has taken on urgency as Pennsylvania's Insurance Department must decide whether to approve the merger of Independence Blue Cross and Highmark Inc., a deal that would create the state's largest health insurer.

As the law stands now, the Insurance Department can approve mergers of their subsidiaries, but not of the parent companies.

On March 28, the same day that Independence Blue Cross and Highmark announced their deal, the Senate passed a bill giving the Insurance Department the authority to approve mergers of parent companies. The bill is retroactive to January.

The House expanded the bill April 24, adding an eight-member oversight commission. Besides four legislators, the commission would include the attorney general, representatives from the state departments of health and welfare, and someone appointed by the governor.

Last week, the Senate Banking and Insurance Committee added the auditor general to that commission. Now, the bill is headed to the House Appropriations Committee.

"Unless the bill is returned to or near its original form . . ., the governor will veto the bill," the governor's legislative affairs secretary, Steven M. Crawford, wrote in a letter sent to senators last week.

The letter said that board would violate constitutional provisions keeping legislative and executive branches separate and would make the attorney general "both prosecutor and judge . . . which would present a dire conflict of interests."

Contact staff writer Jane M. Von Bergen at 215-854-2769 or jvonbergen@phillynews.com.