VIRGINIA OFFICIAL THINKS BLUES MERGER UNLIKELY

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, February 11, 1993                   TAG: 9302110141
SECTION: BUSINESS                    PAGE: C8   EDITION: METRO 
SOURCE: MAG POFF STAFF WRITER
DATELINE:                                 LENGTH: Medium
VIRGINIA OFFICIAL THINKS BLUES MERGER UNLIKELY
Virginia's state insurance commissioner said he thinks a merger between the Blue Cross and Blue Shield plans in the state with their counterparts in Washington, D.C., is unlikely.
The companies, however, said their merger discussions, announced late last year, are on schedule.
Steven T. Foster, Virginia's commissioner, also said he might halt the Northern Virginia operations of the National Capital Area plan if it fails to meet the state's minimum financial requirement.
The commission recently audited the plan, which serves 1.2 million people in Washington, Northern Virginia and Maryland suburbs. The audit hasn't been released, but Foster said the condition of the Washington plan has deteriorated to the point where it soon may be unable to meet Virginia requirements for cash reserves and assets. Virginia requires insurers to have reserves equal 45 days worth of claims.
Foster accused the national Blue Cross and Blue Shield Association, based in Chicago, of refusing to discuss alternatives to the proposal that the Washington and Virginia plans merge.
Bernard R. Tresnowski, head of the Blues association, said the merger discussions are proceeding "in a very constructive manner, but are very sensitive at this time."
Raymond Freson, spokesman for the Washington plan, said it has reserves to handle its claims and "we remain optimistic" about reaching an agreement for acquisition.
James Goss, spokesman for the Virginia Blues plan in Richmond, said meetings are being held this week in the effort to reach agreement on terms for affiliation, and the Virginia company is "optimistic" that terms acceptable to both parties can be found.
In a separate matter, Goss said Blue Cross and Blue Shield of Virginia complies with the main provisions of new standards adopted by the plan's national association.
Those provisions require adequate financial reserves and recommend participation in state funds that protect consumers if an insurance company should fail.
The national association oversees 72 health plans covering 68 million Americans.
Goss said the Virginia plan is one of the top five in the nation for financial soundness. He said it is designated as excellent by Standard & Poors, an agency that rates the solvency of financial institutions.
The Virginia Blues also are a member of the Virginia Life, Accident and Sickness Insurance Guaranty Fund set up to protect consumers, he said.
Thomas Martinstein, senior vice president and general counsel of the Virginia plan, is a director of the state guaranty fund.
Goss said the company "applauds the effort by the association," but the standards are "not an issue" in Virginia.
The Washington plan has been listed as a troubled company for about two years.

by Archana Subramaniam by CNB