Press of Atlantic City

Horizon Blue Cross Applies To Become For-Profit Insurer

Press of Atlantic City — Friday, August 15, 2008

By Ben Leach

TRENTON — Horizon Blue Cross Blue Shield, the state's largest health insurance provider, filed an application Friday morning to convert to a for-profit company, potentially transferring $1 billion or more toward improving the state's health-care system.

According to the company, this conversion would not increase taxes to support the state's health care system, and rates would not increase for people already insured by Horizon.

"The change in premium rates for covered individuals, or groups that we cover, will be no different as a for-profit than it was as a nonprofit," said William J. Marino, president and CEO, Horizon Blue Cross Blue Shield of New Jersey in a teleconference.

Under state law, the entire value of the company, estimated at more than $1 billion, would be transferred to an independent charitable foundation. That foundation would later decide how much of the company to make available in stock options in an initial public offering.

By becoming a public company, Marino said capital investors could buy into the system, making it easier for Horizon to take advantage of other capital offerings, such as new technology to improve its infrastructure.

"Horizon is in the preliminary stages of this process," said Rene Bunting, vice president of marketing for AtlantiCare, another major southern New Jersey health insurer. "We will discuss the implications at the appropriate time."

The state needs to approve the application before this moves forward.

"Across the U.S., there has not been a displacement of customers or an increase in rates as many had feared," said Dave Knowlton, president and CEO of the New Jersey Health Care Quality Institute in a separate interview.

Insurers in other states, including Virginia's Anthem Blue Cross Blue Shield, made the conversion.

"It's not something that's done easily," said Etti Baranoff, associate professor of insurance and finance at Virginia Commonwealth University.

Baranoff said by making the company public, there would be more incentives for Horizon to be a more modern and sophisticated company. For Virginia, it hasn't impacted rates, Baranoff said, but if the co-pays for specialists and emergency room visits go up, people should begin asking questions.

"In my mind, there shouldn't be any fear of rate increases," said Baranoff, referring to monthly payments. "But everybody needs to ask about their premiums, because they can always be renegotiated."

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