Blue Cross seeks new business in D.C. suburbs It wants to sell 3 lines of medical insurance in two Md. counties

State approval is sought

Subsidiary to adopt another title to avoid clash with sister firm

November 11, 1995|By John Fairhall | John Fairhall,SUN STAFF

Taking a "big step" to expand business, Blue Cross announced plans yesterday to sell insurance in an important new Washington-area market -- a key goal of the company's stalled restructuring proposal.

If state regulators approve, a new Blue Cross and Blue Shield of Maryland subsidiary would sell insurance in Montgomery and Prince George's counties and compete against a sister company, Blue Cross and Blue Shield of the National Capital Area.

It's a "pretty big step for us," said Gregory A. Devou, Maryland Blue Cross' senior vice president of corporate marketing.

"About a third of Maryland's total population lives in Montgomery and Prince George's counties," he said. "About 25 percent of the businesses in Maryland are located in Montgomery and Prince George's counties. You can imagine with just those statistics alone what this means to us from an expansion standpoint."

Maryland Blue Cross President and Chief Executive William L. Jews has made geographic expansion a top priority. He hopes to win approval to expand as part of a radical restructuring of the company.

The nonprofit, Owings Mills-based company would like to split into nonprofit and for-profit businesses, and be able to sell stock. Company officials say they need to raise capital as well as expand and get out from under some state regulation.

But the state insurance commissioner rejected the company's first restructuring proposal in January. The company's latest plans await a state consultant's analysis and an uncertain fate in the General Assembly.

So, trying to accomplish at least one restructuring objective, Maryland Blue Cross wants to sell three kinds of insurance in the two suburban Washington counties: traditional "indemnity" insurance that permits subscribers to see any doctor; preferred provider policies that grant subscribers a little less freedom, and point-of-service plans that are, in effect, an indemnity-HMO combina-tion.

The company already sells its HMO policies in that territory. But the company doesn't do as well as it would if it offered employers a complete insurance package, Mr. Devou said.

Maryland Blue Cross will not be allowed to sell insurance under the Blue Cross name and logo, however -- that's prohibited by the national Blue Cross licensing agreement that defines marketing territories for each company. The insurance would be sold under other names.

Mr. Devou downplayed the competition with Blue Cross of the National Capital Area, saying his company will be competing more with other insurers, like Mid-Atlantic Medical Services Inc. in Rockville.

But one Baltimore insurance broker predicted Maryland Blue Cross will hurt the other company.

"That's going to put Blue Cross of Washington, D.C., in a very difficult position," said the broker, who asked not to be identified because he sells Blue Cross policies. "Let's face it: Their marketplace could shrink to just inside the beltway."

Blue Cross of the National Capital Area's licensed territory is the two Maryland counties, Washington, D.C., and part of Northern Virginia. But it is squeezed by Maryland Blue Cross to the north and another Blue Cross plan in Virginia.

Officials of the Washington-area plan suggested they're not worried.

"We welcome the competition," a spokeswoman said.

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