Highmark is adding more than 1 million members through an affiliation with Blue Cross Blue Shield of Kansas City, the health insurers announced Thursday.
The deal, which is expected to close next year pending regulatory approval, will make Highmark the third largest Blue Cross Blue Shield-affiliated organization in the country with more than 8 million members.
It also represents the Pittsburgh-based insurer’s first time breaking out of the East Coast. As of now, Highmark’s footprint is limited to Pennsylvania, Delaware, West Virginia and New York.
“It’s a geographic departure, but today’s world is a little different,” Highmark CEO David Holmberg said Thursday on a call with other executives. “You don’t have to be next door in order to impact how care is delivered, access to care and affordability of care.”
Highmark already has a national footprint through its dental and stop-loss insurance products with a total of 26 million customers, noted Deborah Rice-Johnson, CEO of Highmark’s diversified businesses.
“It’s not really foreign for us to have partnerships across the country,” she said.
Highmark officials did not disclose the financial terms of the agreement.
Blue Cross and Blue Shield of Kansas City — known as Blue KC — is the largest nonprofit health insurer in Missouri and the only such organization serving the Kansas City area.
In a press release, Blue KC said it was looking for a partner to make its operations more efficient, expand capabilities and manage rising health insurance costs.
“We explored a number of opportunities to build on our commitments to the Kansas City region and be responsive to market needs,” Erin Stucky, CEO of Blue KC, said in a statement. “Our evaluation process was comprehensive, and we are confident Highmark is the right partner to help us deliver greater value for our community.”
Blue KC will continue to operate under its existing brand and remain headquartered in Kansas City. All financial reserves and earnings will remain within the organization (Highmark executives said the deal is not a traditional acquisition).
The Highmark parent organization, which includes the 14-hospital Allegheny Health Network, took an operating loss of $209 million on $29.4 billion in revenue last year.
The much smaller Blue KC’s operating loss was $135 million on $3.1 billion in revenue in 2023, the most recent year for which the organization gave financial reports.
Holmberg acknowledged the challenging fiscal environment for health insurers, which face ballooning medical care costs and high service utilization rates.
“Any time you have an opportunity for two organizations to come together, both with strong, talented teams with a lot of capability… and work simultaneously on some of these bigger issues, that’s a good thing,” he said.
Highmark was once a relatively small player in the insurance market. When it formed in 1996 as a merger of Blue Cross of Western Pennsylvania and Pennsylvania Blue Shield, Highmark had around 3 million members.
Its most recent affiliation came in 2021 with HealthNow New York, which has since rebranded as Highmark Blue Cross Blue Shield of Western New York and Highmark Blue Shield of Northeastern New York.
Highmark moved into Southeastern Pennsylvania last year to extend its presence to all 67 counties in its home state.