VT. POLICY TRANSFER DEAL KILLED:

A plan to transfer 4,100 health insurance policies from Mutual of Omaha to Blue Cross/Blue Shield of Vermont fell apart over questions of creating a subsidiary for the deal. Mutual of Omaha, which is getting out of individual major medical coverage, tried to transfer the policies to Blue Cross in Montpelier. Blue Cross, though, wanted to set up a for-profit subsidiary through which it would operate this new business. State officials said Vermont law does not allow Blue Cross, a nonprofit hospital and medical services corporation, to form or acquire for-profit subsidiaries. The policies will not be renewed. The Omaha, Neb.-based company announced last year that the high cost of health care and excessive regulation was forcing it to pull out of the individual major medical and major hospital market nationwide. The company eliminated the coverage in the 35 states in which it was offered.