M-CARE will be sold for $240 million.

The University's Board of Regents approved the deal to sell the health care provider to Blue Care Network of Michigan, a subsidiary of Blue Cross Blue Shield, by a 6-0 vote at its meeting Friday.

Regents Larry Deitch (D-Bingham Farms) and Martin Taylor (D-Grosse Pointe Farms) recused themselves from the vote. Taylor is a member of the board of directors of Blue Cross Blue Shield of Michigan.

Deitch could not be reached for comment.

Blue Cross's board approved the purchase prior to Friday's meeting.

Before the sale becomes final, state and federal regulators must review the terms of the agreement for antitrust violations. The review is expected to last several months.

The sale is slated to be finalized late this year or in early 2007.

No one spoke during a public comment period created to discuss the sale, which was held before the vote.

Robert Kelch, CEO of the University Health System, said that since the sale's announcement, his office has received about three dozen letters from M-CARE employees and customers concerned about the deal.

Now is the right time to sell M-CARE because of recent trends in the insurance industry, Kelch said. In order for M-CARE to continue to be profitable, he said, the University Health System would have to make large capital investments in technology systems.

Kelch said doing so would detract from the University Health System's main objectives of research and care.

"I fully support the plan they are bringing forward and the rigid analysis that went into this proposal," University President Mary Sue Coleman said at the meeting.

The University hired Cain Brothers, an investment banking firm, to help with the negotiations and to provide an analysis of the price of the sale.

M-CARE covers about 200,000 members, including 60,000 University employees, graduate students, retirees and their dependents.

M-CAID, which insures the Medicaid populations of Washtenaw, Livingston and part of Wayne counties, will also be sold to Blue Care Network.

M-CARE's remaining PPO programs managed by the Michigan Health Insurance Corporation will be sold directly to Blue Cross Blue Shield of Michigan.

M-CARE employs about 400 people in the Ann Arbor and Southfield areas.

The number of jobs that will be eliminated because of the sale is still unclear, Kelch said.

Until the sale is finalized, M-CARE employees will be offered a retention incentive to continue to work in their current positions. After that time, many employees may remain on staff during the transition period under a lease agreement with Blue Cross. Employees may also be transferred to other positions within the University.

If their jobs are cut, employees will receive at least 60 days notice, according to federal regulations and University policy.

The University will not offer a severance package, but will provide career consoling for employees seeking new jobs.

M-CARE customers will not experience any lapses in coverage, Kelch said.

M-CARE will continue health care plans for University employees through 2007. At that time, employees can enroll in a plan with equivalent coverage and benefits through Blue Cross, Kelch said.

The University will retain control over its benefits packages and will also have a seat on Blue Care Network's advisory board, he said.

Kelch said because M-CARE and Blue Cross share many health care providers, customers will likely be able to continue seeing their current physician. Premiums will not go up as a result of the sale, Kelch said.

As part of the sale, Blue Cross and the University are launching a joint venture to improve health care in Michigan including quality, safety and efficiency concerns.

An eight-member board - with an equal number of University and Blue Cross representatives - will manage the project.