NorthJersey.com

Rates Could Rise If Horizon Goes For-Profit

The Record / NorthJersey.com — Friday, November 21, 2008

BY ELISE YOUNG
TRENTON BUREAU

New Jerseyans could pay higher rates if the state's largest health insurer, Horizon Blue Cross Blue Shield, becomes a for-profit company, a consumer coalition warned Thursday.

To demonstrate how such deals can go astray, the group pointed to a similar conversion in New York, where officials took nearly $1.1 billion — intended for charity care — and added it to state workers' salaries.

"This is a big decision for Blue Cross Blue Shield," said Eve Weissman, of the consumers group Horizon Watch. "We're mostly concerned about the impact this conversion will have on New Jersey's most needy."

Thomas Rubino, a spokesman for Horizon, said the insurer has confidence in state regulators' review of its application to become a for-profit company. The company ultimately could please customers and corporate shareholders, he said.

Rubino praised Horizon Watch for one of its goals: total disclosure during the public examination of its for-profit application, filed with state regulators in August.

"We agree with all those things in terms of transparency," he said.

Horizon has said it wants to become for-profit so it can raise capital and acquire more technology. Horizon Watch has more than two dozen member groups, including AARP, Consumers Union and New Jersey Citizen Action.

At a State House news conference, its members said the 3.6 million people covered by the insurance giant — including 400,000 Medicaid recipients — could face fewer choices and costlier premiums. The group also forecast higher rates for non-Horizon clients should doctors and hospitals have to raise fees as a result of the insurer's restructuring.

It pointed to ill-fated Blue Cross Blue Shield conversions in Kansas, Washington, Maryland and North Carolina. In some cases, reviews of the insurers' plans dragged for years, often becoming entangled in the legal system.

If Horizon were to become for-profit, an amount equal to the company's stock value — an estimated $1 billion or more — would be placed in a foundation whose investments would fund charitable care for the poor and underinsured.

New Jersey regulators must tighten the conversion proposal's language so that what happened in New York isn't repeated here, said Charles Bell, a director for Horizon Watch member Consumers Union. New York "took 95 percent of that conversion fund," he said.

Just as important, Bell said, is the potential for company executives to benefit personally.

Prior to the New York conversion, the Empire Blue Cross Blue Shield chief executive was paid about $2 million a year in salary and benefits, Bell said. After Empire converted — and was taken over by another insurer — the CEO wound up with $15.5 million in compensation for 2006, he said.

"It's hard to look at these things and say CEOs are not motivated," Bell said.

A decision on conversion in New Jersey was expected to take up to nine months, but Rubino said the process probably will take longer.

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