Blue Cross Blue Shield of Michigan-owned DenteMax acquired by Dental Network of America

Sale and business arrangement will give BCBSM customers expanded national dental network, solidify BCBSM position as major carrier in dental market

July 1, 2009

SOUTHFIELD - Blue Cross Blue Shield of Michigan announced today that its DenteMax dental network leasing subsidiary has been acquired by Dental Network of America, LLC (DNoA), a strategic move that — coupled with a business arrangement between BCBSM and DNoA — will provide BCBSM with a more competitive dental product offering that will include a larger national dental network. The dental network growth will be matched with a renewed emphasis by BCBSM to integrate medical and dental benefits into a comprehensive approach that takes advantage of the relationship between oral health and overall health.

DenteMax provided the dental network to BCBSM, which it will continue to provide after the sale. BCBSM will continue to offer dental products and coverage.

DNoA is a subsidiary of Health Care Service Corporation, the largest customer-owned health insurer in the U.S., which operates Blue Cross and Blue Shield plans in Illinois, New Mexico, Oklahoma and Texas. DNoA has more than 20 years of leading expertise in the design and administration of dental programs and networks. Based in Oakbrook Terrace, Illinois, DNoA provides comprehensive administrative support to over 2.6 million members nationally.

Southfield, Mich.-based DenteMax was a wholly owned for profit subsidiary of Blue Cross Blue Shield of Michigan. DenteMax manages one of the largest national, seamless, credentialed dental PPO networks, which is leased by hundreds of insurance companies, third-party administrators and self-funded groups for use in their dental benefit plans.

The sale of DenteMax and business arrangement with DNoA does not impact BCBSM's ability to offer the Blue Dental product. In fact, it will help facilitate what will be a much more competitive dental offering to Michigan consumers.

"Blue Cross Blue Shield of Michigan is continuing to aggressively improve its dental products," said Mark Bartlett, BCBSM executive vice president and CFO. "This strategic move will provide us with access over time to an expanded national dental network for our customers. At the same time, we will renew our emphasis on integrating dental and medical benefits — something we can provide that many others can't. The sale and business arrangement will position our Blue Dental products to be of even greater value in the market."

The national network available to BCBSM dental customers will expand over time from 91,000 dental access points across the country to up to 133,000 access points. The business arrangement also gives BCBSM an opportunity to work with DNoA on innovative new products, helping it to be ahead of where the market is going. This will strengthen BCBSM's ability to take advantage of the relationship between good oral health and overall health. BCBSM offers a one-stop shopping solution by packaging together medical and dental benefits for its customers.

The business arrangement is also expected to generate savings in support services over time as costs are spread over the larger DNoA and BCBSM dental membership base.

Both companies will work toward a seamless ownership transition. There will be no disruption of coverage to Blue Dental or DenteMax customers or to dentists providing services. DenteMax headquarters will remain in Southfield, Michigan and operate under the DenteMax name.

All 84 DenteMax employees will retain employment as part of the sale. The majority will retain employment under the DNoA ownership; the balance will transfer to BCBSM. BCBSM employees providing customer service and claims processing support service at the DenteMax headquarters will relocate to BCBSM offices in Southfield to perform those functions.

"DNoA is well positioned to help DenteMax find new growth opportunities while building on its core strengths of a strong dental network and commitment to quality service," said Rick V. Morrone, president and CEO of DenteMax, who will rejoin BCBSM as vice president of General Motors/Delphi control plan.

Bartlett said that the opportunity to work closely with another Blue plan was an added benefit to the sale: "Blue Cross Blue Shield of Michigan and Health Care Service Corporation are both Blue Cross plans, have similar missions and operate dental subsidiaries. We believe this sale and business arrangement will allow the innovative programs that DenteMax has built to be incorporated into an organization that shares many similar approaches to health and dental coverage. This is an opportunity to do business with another organization whose mission, and focus on improving health and dental care, aligns with that of ours. The new arrangement will enable BCBSM to remain very focused on delivering quality dental products that our customers expect."

DenteMax was founded in Michigan in 1985 and was purchased by BCBSM in 2002 to operate as an independent subsidiary. DenteMax has been leasing a quality dental PPO network for over 24 years and has established partnerships with dentists, employer groups and nearly 200 payers.

The purchase price was not publicly disclosed by the parties.

About Dental Network of America

Dental Network of America, LLC (DNoA) is a wholly owned subsidiary of Health Care Service Corporation (HCSC), a Mutual Legal Reserve company and an independent licensee of the Blue Cross and Blue Shield Association. HCSC is the largest customer-owned health insurer in the U.S. and the fourth largest health insurer in the country overall, with 12.4 million members in its Blue Cross and Blue Shield plans in Illinois, New Mexico, Oklahoma and Texas. DNoA acts as the claims and network administrator for all HCSC dental programs, including their integrated medical-dental wellness program called BlueCare Dental Connection, providing comprehensive administrative and consultative support to 2.6 million members nationwide. DNoA also offers services in proprietary network development, actuarial, underwriting, marketing and sales support to their clients. Dental products are administered for individual programs, and groups with as few as two employees to thousands of employees. For more company information, visit dnoa.com.

About Blue Cross Blue Shield of Michigan

Blue Cross Blue Shield of Michigan, a nonprofit organization, provides and administers health benefits to 4.7 million members residing in Michigan in addition to members of Michigan-headquartered groups who reside outside the state. The company offers a broad variety of plans including: Traditional Blue Cross Blue Shield; Blue Preferred®, Community Blue℠ and Healthy Blue Incentives℠ PPOs; Blue Care Network HMO; BCN Healthy Blue Living℠; Flexible Blue℠ plans compatible with health savings accounts; Medicare Advantage; Part D Prescription Drug plans, and MyBlue℠ products in the under-age-65 individual market. BCBSM also offers dental, vision and hearing plans. Blue Cross Blue Shield of Michigan and Blue Care Network are nonprofit corporations and independent licensees of the Blue Cross and Blue Shield Association. For more company information, visit bcbsm.com.