IBX partnering with Mich. insurer on Medicaid

Independence Blue Cross, the region's largest health insurer, is forming a partnership with Blue Cross and Blue Shield of Michigan to enhance both companies' ability to gain market share in providing health insurance through Medicaid, a government-funded program for the poor.

The two companies will spend a combined $170 million to buy out Mercy Health System's 50 percent share in AmeriHealth Mercy. The other 50 percent is already owned by Independence Blue Cross.

AmeriHealth is headquartered in Philadelphia.

The move represents a big bet by the two companies that they can snag the 16 million new people expected to be eligible for Medicaid under the provisions of the federal health-care legislation enacted last year.

While Independence Blue Cross has long been a player in Medicaid, the deal opens the field for Michigan Blue Cross, which has not actively pursued that line of business, its chief executive, Daniel J. Loepp, said Tuesday.

Both Loepp and Independence Blue Cross' chief executive, Daniel J. Hilferty, said that they see a potential market within the national Blue Cross Blue Shield network, where two-thirds of the plans do not offer Medicaid insurance.

AmeriHealth Mercy now operates in 11 states, including Pennsylvania and New Jersey, and serves 4 million Medicaid, Medicare and low-income children. Independence Blue Cross serves 3.1 million people, and Blue Cross Blue Shield of Michigan serves 4.3 million.

Mercy Health System is a division of Catholic Health East, an 11-state network of hospitals headquartered in Newtown Square.

Based in Conshohocken, it operates several Catholic-run hospitals in the region, including Mercy Fitzgerald Hospital in Darby and Mercy Suburban Hospital in Norristown.