Anthem purchase gives insurer bigger share in Tennessee but not Blue Cross name

FILE - This Feb. 5, 2015 file photo shows the Anthem logo at the health insurer's corporate headquarters in Indianapolis. Anthem on Monday, June 22, 2015 reaffirmed their commitment to buy rival Cigna a day after Cigna shot down the idea in a letter delivered to Anthems board. (AP Photo/Michael Conroy, File)
FILE - This Feb. 5, 2015 file photo shows the Anthem logo at the health insurer's corporate headquarters in Indianapolis. Anthem on Monday, June 22, 2015 reaffirmed their commitment to buy rival Cigna a day after Cigna shot down the idea in a letter delivered to Anthems board. (AP Photo/Michael Conroy, File)

Anthem Inc., which already operates Blue Cross and Blue Shield Association plans in Georgia and 13 other states, will add thousands of employees and tens of thousands of subscribers in Tennessee with its purchase of Cigna Healthcare.

But Anthem won't be able to market itself in Tennessee or Alabama with the Blue Cross brand. That brand belongs to independent Blue Cross plans in those states, including the Chattanooga-based BlueCross and BlueShield - the biggest health insurer in the Volunteer State.

Cigna is the second biggest commercial health insurer in Tennessee, behind only BlueCross.

Cigna acquired Healthsource in Chattanooga from the predecessor of Unum Corp., in 1995 for $231 million and now employs more than 1,300 employees at claims processing offices in downtown Chattanooga and in East Brainerd. In 2011, Cigna paid $3.8 billion to buy the Franklin, Tenn.,-based HealthSpring, which employs more than 2,500 Middle Tennessee workers and offers Medicare Advantage plans 14 states and Washington D.C., plus a nationwide prescription drug plan.

photo The Cameron Hill headquarters of BlueCross BlueShield of Tennessee in downtown Chattanooga.

Joseph Swedish, the Anthem CEO who will continue to head the combined company, said the two companies together will be stronger and more profitable and have "an even brighter future." But company officials project Anthem should realize $2 billion of cost savings through synergies with Cigna that will involve some cuts in offices and personnel.

While staff cuts may be coming if the merger is completed next year, Anthem should expand its market presence in Tennessee, analysts said.

"In Tennessee, Anthem has a real opportunity to compete and perhaps dominate if they truly invest locally," said John Sorrow, a former Cigna executive who is now chief agency executive at BB&T Huffaker Insurance in Chattanooga. "Cigna has had a huge blind spot here largely because it isn't in the individual (or even small group) market."

Tennessee is one of the most impacted states for Blue Cross plans by the Anthem purchase.

There are 36 independent Blue Cross plans which collectively cover more than 106 million Americans. But the Blue Cross brand in Tennessee is owned by the Chattanooga-based insurer. Anthem, even though it is the nation's biggest Blue Cross insurer, is not expected to be able to sell under the Blue Cross label in Tennessee.

Anthem already competes with BlueCross in Tennessee through its acquisition of Amerigroup, which participates in TennCare. But the addition of Cigna will make Anthem one of the state's major players. By buying Cigna, Anthem creates a unique situation for the Chattanooga-based BlueCross plan, which will both be a partner with Anthem in handling claims for Blue Cross plans from other states and a competitor with Anthem for customers within Tennessee.

Cigna has a heavy concentration of commercial lives in non-Anthem markets, including here in Tennessee. But BlueCross Vice President Roy Vaughn said Friday that the Tennessee BlueCross plan has a long history of competing against much larger competitors.

"As new competitors enter and leave the market from time to time, we've found the best approach is staying focused on our customers and their needs," Vaughn said. "While doing so, we have proven to be one of the highest performing Blue plans in terms of efficiency, affordability and service."

BlueCross has a majority of the overall heath insurance market in Tennessee with 3.46 million members and a healthy reserve balance of more than $1.8 billion.

But in a note to Huffaker clients Friday, Sorrow predicted the health insurance market is likely to change in Tennessee and Alabama when and if the Anthem purchase of Cigna is completed and if regulators don't force changes in the deal for Anthem in the two states.

"It is going to be a thrilling ride," Sorrow said. "In Tennessee, we will now have two true heavyweights competing over the next few years. This is a significant threat to Blues market share in Tennessee."

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.

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