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Blue Cross NC withdraws merger application with Cambia after CEO’s resignation

Blue Cross Blue Shield of North Carolina and Cambia Health Solutions officially ended their plans to merge following the resignation of former Blue Cross NC CEO Patrick Conway.

Interim Blue Cross NC CEO Gerald Petkau called N.C. Insurance Commissioner Mike Causey Friday afternoon to inform him that merger talks have ended and that the companies are withdrawing their merger application to regulators.

Earlier this week, the two insurance companies said they were putting their merger talks on hold after new details emerged about Conway’s June 22 drunken-driving arrest.

The companies took that to the next level Friday by officially removing their applications to combine. That merger needed approval in five different states, including North Carolina, Oregon and Washington.

Conway, who resigned Wednesday night, was a crucial part of the potential merger with Cambia. He was set to be the CEO of both companies with dual headquarters in Durham and Portland, Ore.

Patrick Conway BCBS.jpg
Patrick Conway, CEO of Blue Cross Blue Shield of North Carolina

The two insurers had been betting that despite the distance — and by sharing resources, a corporate backroom and advanced data — they could reduce costs, improve quality and develop new services more efficiently.

A spokesman for Blue Cross NC declined to comment further on the withdrawal of the merger application. Cambia did not respond to The News & Observer’s request for comment Friday evening.

“For now it is over, and that ends the regulatory process,” said Barry Smith, a spokesman for the N.C. Department of Insurance, which was overseeing the approval process.

While the deal is done for now, the two insurers could restart the merger process again — though it would require them to file a new application with regulators.

Smith declined to speculate on whether the Insurance Department would take into account recent events, if a new merger application is filed in the future.

“The commissioner did not get any indication that there were any plans to re-submit (a merger application),” Smith said in a phone interview. “However, they didn’t say they wouldn’t ever submit again.”

Original merger plan

Blue Cross NC and Cambia originally announced their intentions in March to form a partnership. The deal, if approved by regulators, would allow the companies to collectively cover around 6 million people and have $16 billion in combined revenue.

Regulators across five states condemned Blue Cross NC this week after news reports came out about Conway’s arrest in June. Regulators in North Carolina, Oregon and Washington said that they had a right to know about the arrest within days of the incident and expressed dissatisfaction that they only were learning of it months after the fact.

Causey went as far as to call for Conway’s resignation, saying there was “no path forward” with him at the helm of the state’s largest insurer.

Causey accused Blue Cross NC of attempting to cover up the incident, saying if it wasn’t for media outlets reporting on the incident, the Insurance Department likely still wouldn’t know about it.

Wednesday, Conway released a statement to apologize and said he “immediately disclosed” the arrest to Blue Cross trustees and stepped down from his duties to focus on completing 30 days of substance use treatment.

“I have never had an incident like this before, and it is not consistent with who I am as a father, husband and community member,” Conway said in his statement.

“However, I also understand that I must continue to work hard to earn back the trust I’ve lost based on my actions,” Conway continued. “I therefore am resigning my position as CEO of Blue Cross Blue Shield of North Carolina, and will continue to respect and honor the legal process. In time, I look forward to continuing my work ensuring everyone has access to high quality, affordable healthcare.”

Trustees appointed Petkau, the chief operating officer, as the company’s interim CEO.

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