Conversion of Horizon Blue Cross Blue Shield of New Jersey

What Will the Conversion Mean For You?

Horizon Blue Cross Blue Shield (BCBS), NJ's largest and only not-for-profit health insurer has filed an application to convert to a for-profit corporation. The conversion of Blue Cross raises serious concerns for NJ consumers and taxpayers.

Current law requires the Commissioner of Banking and Insurance and the Office of the Attorney General to ensure that the proposed conversion is in the public's interest and will not to have an adverse impact on access to health care and, if authorized, to require the full value of Blue Cross' assets to be transferred to a nonprofit foundation dedicated to "expanding access to affordable quality health care for underserved individuals and promoting fundamental improvements in the health status of all New Jerseyans."

Blue Cross' assets (worth over $1 billion, possibly up to $8 billion) have been built up over decades of favorable tax and regulatory treatment provided by the government because Blue Cross is organized to pursue the nonprofit, charitable mission of offering affordable health insurance. By contrast, the mission of a for-profit insurer is solely to maximize returns for its shareholders.

As a nonprofit, the people of New Jersey are effectively Horizon's current 'shareholders,' and should be treated as such.

As shown in other states around the country, the Blues have been forced to further their charitable mission by disgorging excess reserves that they have built up to support the expansion of health insurance, have been denied the right to convert when the State has determined that conversion would have a negative impact on premiums and other access indicators, or, if permitted to abandon their nonprofit mission, to transfer the full value of their assets to a foundation for the benefit of state residents. Under all circumstances, Horizon's assets should be dedicated to activities that improve the health of New Jersey citizens, particularly the medically underserved, and not be used as a one shot revenue source to satisfy current state obligations.

• The Commissioner of Insurance should examine Horizon's reserves and hold public hearings as to how any excess reserves should be used to expand the public's access to affordable health insurance.
• The Commissioner of Insurance should retain experts to evaluate the impact of the proposed conversion on the health status of State residents, the ability of providers to negotiate with Horizon, and insurance premiums, particularly in certain sub-markets such as Medicaid, small employer and individual health plans.
• The process of determining whether the conversion should be permitted, Horizon's true value, and the structure of the proposed conversion should occur with appropriate public participation — not behind closed doors. The public must be given standing to participate in the decision-making process and must have access to all the information needed to evaluate the proposed transaction.
• If conversion is determined to promote the public's interest, the Commissioner and the Attorney General should require Horizon to transfer the full fair market value of Horizon's charitable assets to a nonprofit foundation, as currently provided by law to be used to expand access to affordable quality health care for the underserved.
• The health care goals and criteria for grant-making of a new charitable foundation should be developed in a public process, and its governance shall be free from conflicts of interest with Horizon, other for-profit health care companies and, most importantly, the State. Funds from the foundation should be used to expand health coverage programs, but cannot be used to replace current State obligations.
  

Additional Resources

• NEW! HealthCareBeforeProfits.com — information on Horizon Blue Cross Blue Shield’s application to convert to a for-profit insurance company
• NEW! NJ Department of Banking and Insurance response to Horizon's conversion application
• NEW! NJ Attorney General's letter response to Horizon's conversion application
• Looking at the Full Picture: Analyzing the Community Health Impact of Hospital and Insurer Transactions, By Community Catalyst
• Conversion and Preservation of Charitable Assets of Blue Cross and Blue Shield Plans: How States Have Protected or Failed to Protect the Public Interest, By Community Catalyst

In The News

• "Blue Seeks The Green" (Asbury Park Press — September 21, 2008)
• "Horizon Bid Bad Medicine" (Asbury Park Press — August 20, 2008)
• "Should Horizon Blue Cross Blue Shield Seek For-Profit Status?" (The Star-Ledger — August 16, 2008)
• "Horizon Wants For-Profit Status" (CourierPostOnline — August 16, 2008)
  
• "N.J.'s Biggest Insurer May Turn For-Profit" (Philadelphia Inquirer — August 16, 2008)
  
• "Horizon Blue Cross Applies To Become For-Profit Insurer" (Press of Atlantic City — August 15, 2008)
  
• "Horizon Blue Cross Blue Shield Seeks For-Profit Status" (The Star-Ledger — August 15, 2008)
• "Horizon Files To Become For-Profit" (NJBIZ — August 15, 2008)