Highmark and Independence Blue Cross Agree to Combine

The boards of directors of Highmark Inc. and Independence Blue Cross (IBC) announced today that they have approved an agreement to combine the two organizations. The new company, which will maintain dual headquarters in Pittsburgh and Philadelphia with regional presence and operating locations throughout the Commonwealth, will generate more than $1 billion in economic benefits to provide access to affordable, high-quality health care coverage for Pennsylvanians. Combining the substantial talents and resources of both organizations will also allow the new company to better serve its customers and providers and to help improve health care quality.

Kenneth R. Melani, M.D., president and chief executive officer of Highmark, said, "This combination is great for our customers, our providers, our employees, our communities, and for Pennsylvania. By bringing together the best practices of the two organizations, we will remain a Pennsylvania- based company and work to expand access to health care coverage, make health insurance more affordable and improve the quality of medical care and the overall health of the communities we serve."

Joseph A. Frick, IBC's president and chief executive officer, said, "The new company will continue to serve as an economic engine for Pennsylvania, employing approximately 18,000 people statewide and having an estimated $4 billion impact on the state's economy. Together, we expect to generate new business that can create more jobs in Pennsylvania and stimulate additional business opportunities for Pennsylvania-based companies."

The new, combined company will have the resources to: — Hold administrative fees flat for two years resulting in direct savings to customers of $300 million — Better manage prescription drug costs, which are expected to result in $280 million in drug cost savings for customers — Provide over $650 million to help expand access to health insurance for Pennsylvania's uninsured population

In 2006, Highmark and IBC contributed over $200 million in support of the community primarily focused on health and education programs such as: funding clinics for the uninsured, increasing the supply of nurses through scholarships, fighting hospital- acquired infections, helping eliminate disparities in health care, preventing childhood obesity, promoting community wellness through programs to address nutrition, weight management, smoking cessation, osteoporosis and heart disease. The companies reaffirmed their commitments to the communities of Pennsylvania and said that they intend to enhance their support going forward.

Melani said, "The new company will continue the long-standing missions of Highmark and IBC of providing Pennsylvanians with access to high-quality, affordable health care coverage. The two companies are strongly committed to continuing health care programs that offer coverage to everyone in Pennsylvania, regardless of medical history, current health, age or gender."

Frick said, "Our companies have been working closely together for more than 50 years and are unified in our underlying goal: to make health care coverage better and more attainable for all Pennsylvanians. By combining our two organizations, we will be better able to maintain affordable programs, meet shifting customer demands for new products and fund essential technological and infrastructure improvements in the face of challenges from much larger, for-profit out-of-state health insurance companies."

Kenneth R. Melani, M.D. will be chief executive officer of the combined company. Joseph A. Frick will be president and chief operating officer. M. Walter D'Alessio, current chairman of IBC's board of directors, will serve as chairman of the combined company's board and J. Robert Baum, Ph.D, current chairman of Highmark's board of directors, will serve as vice chairman of the combined company's board.

In communications to employees of Highmark and IBC, Melani and Frick said, "It is through your hard work and dedication to our customers, and the communities we serve, that we have built two great companies. We look forward to working together to build an even better company."

Formal filings for state and federal regulatory approvals will begin in April. Pending approval by regulatory agencies, the two companies will continue to operate as separate entities.