Univera Healthcare and the parent company of Blue Cross and Blue Shield of Rochester said Thursday they will join forces, creating the second-largest health insurer in New York State.
The smaller Univera HMO will operate under the much larger Excellus umbrella but will keep its name and headquarters in the Buffalo area, making the change somewhat invisible to members of the not-for-profit health plans.
Officials say the merger will allow Excellus to expand into a new market, give Univera access to traditional health insurance plans it can sell here, spread fixed costs over a wider population and place the merged company in a better position to serve statewide employers.
They also described the consolidation as a defensive move in anticipation of for-profit health insurers attempting to expand into Western and Central New York.
The merger is expected to take at least six months to complete and will require approval by state and federal regulatory agencies.
The new company will have 2.15 million members in 45 counties in the state -- second only to Empire Blue Cross and Blue Shield -- 7,000 employees and combined annual revenue of $3.6 billion.
"Excellus is an organization with a lot of scale and capability. And at a time of uncertainty in the marketplace, the merger will make us the strongest, most stable company in upstate New York," said Dr. Arthur Goshin, president and chief executive officer of Univera.
Goshin said he will remain in his current position and take an unspecified role within Excellus.
Excellus, which is headquartered in Rochester, formed in 1998 when the Blues plans in Rochester, Central New York and Utica-Watertown joined together. It operates health maintenance organizations and sells traditional indemnity health insurance, in which care is paid for on a fee-for-service basis.
The company, which has 4,700 employees, provides health insurance to 1.8 million people.
Excellus also finances long-term care for more than 42,000 people nationwide through its Finger Lakes Long Term Care Insurance Co. in New York State and MedAmerica in 46 other states and the District of Columbia. And it provides employee benefits consulting and administrative services through its Excellus Benefit Services subsidiary.
The company last year attempted to enter the Buffalo market when HMO Independent Health agreed to distribute its traditional insurance here. But few sales were made and the relationship fizzled, officials said.
"We were interested in a more formal arrangement and with Univera we saw a chance to partner with an organization that shares our mission and goals," said Emil D. "Zeke" Duda, executive vice president and chief financial officer of Excellus.
Duda warned that regional not-for-profit health insurers needed to beef up if they hoped to compete with national for-profit companies, such as Aetna U.S. Healthcare and United Healthcare.
"We anticipate that the Aetnas, CIGNAs and Uniteds are looking to make inroads into Rochester and Buffalo. They are already in the biggest communities, and for their stock price to grow, they're going to have to enter the next level of cities. We need to be prepared for that," he said.
Formerly known as Health Care Plan, Univera formed in 1976 as the region's first HMO. It began by operating its own medical centers but later branched out to offer the type of managed care that members receive in doctors' offices.
The company now has 200,000 members in the Buffalo area, 125,000 in Syracuse and 21,000 in the Southern Tier. It employs 2,300 people and is headquartered in Williamsville.
In 1999, it completed a merger with Health Services Medical Corp., a Syracuse-area HMO that operates health centers with the "Prepaid Health Plan" name in Syracuse and Cortland.
Univera also is the senior owner of Vytra Health Plans Long Island, an HMO in Queens and Long Island. Univera in 1998 bought North AmeriCare, an HMO started in 1995. The deal gave Univera new members concentrated mainly in Jamestown, Olean and Corning.
Officials said they anticipated no layoffs as a result of the deal.