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Patrick Springer, Published July 19 2009

North Dakota to net insurance option in hospital merger

The Sanford-MeritCare medical system merger would create a new health insurance option in North Dakota.

The Sanford Health Plan, now available to patients in South Dakota, Minnesota and Iowa, would extend to North Dakota if the two health systems join forces as expected.

“We expect that will be very successful, very well-received,” said Kelby Krabbenhoft, CEO of Sanford Health, based in Sioux Falls, S.D. MeritCare is based in Fargo.

The entry of a new health insurer would create another option for consumers in a marketplace dominated by Blue Cross Blue Shield of North Dakota, which has almost 90 percent of the market.

Adam Hamm, North Dakota insurance commissioner, said he welcomes firms that are committed to serving the market and providing good coverage.

“I want to see more competition and choice in the health insurance market,” he said.

The Sanford Health Plan is a so-called health maintenance organization, a consumer offering that combines an integrated health-delivery system with insurance coverage.

“Now MeritCare will own an insurance company as part of the dowry that’s coming to this region,” he told reporters Friday when outlining benefits of the proposed merger.

Sanford’s goal is to double the size of its health plan, to 100,000 enrollees.

Krabbenhoft concedes that its offering ranks far behind Wellmark Blue Cross Blue Shield, South Dakota’s largest health insurer, which has 315,526 customers.

“We haven’t unseated anyone,” Krabbenhoft said.

Still, he said, Sanford’s health plan has grown steadily without a big marketing push of billboards or TV advertising.

Blue Cross Blue Shield of North Dakota covers more than 475,000 customers, either directly or through administrative agreements.

As measured by premium dollars, the North Dakota Blues are almost 20 times larger than their closest rival, according to figures kept by state insurance regulators.

Last year, the North Dakota Blues had premiums totaling $447 million, or 89.4 percent of the market. Medica, the next largest, had premiums worth $22.9 million, or a 4.6-percent market share.

The North Dakota Blues don’t seem daunted by the possible entry of a new rival in the health insurance market.

“We deal with competition on a daily basis and we will continue to focus on offering the best value and customer service to our members,” said Denise Kolpack, vice president for corporate communications of Blue Cross Blue Shield of North Dakota.

Krabbenhoft said being in the health insurance business provides a valuable perspective to health providers, who begin to see the system from the perspective of those who pay the bills for the care.

“You learn a ton,” he said. “I hope it will be perceived as a win-win-win,” he added, noting the competitive ramifications.

The boards of MeritCare and Sanford last week each gave unanimous approval to the merger and have signed a letter of intent, with plans to reach final agreements in the fall.

Sanford-MeritCare would serve an area of almost 100,000 square miles in parts of five states with a population of 2 million.

Readers can reach Forum reporter Patrick Springer at (701) 241-5522