The Star-Ledger

N.J. Assembly Committee Approves Third Reviewer For Blue Cross Blue Shield For-Profit Shift

The Star-Ledger — Thursday, June 11, 2009


TRENTON — Horizon Blue Cross Blue Shield's effort to convert to a publicly traded company would face a new level of scrutiny under a bill that cleared an Assembly committee today.

The committee voted the New Jersey Public Advocate office as the third state agency required to evaluate whether the public would benefit from such a deal. This comes in the midst of a long and sometimes adversarial process to get the state to sign off on making New Jersey's largest health insurer a for-profit company.

Since Horizon announced in August it wanted to go public, the Department of Banking and Insurance and the Attorney General's office have spent $1.7 million on investment bankers, lawyers and actuaries to evaluate the effect on consumers and the marketplace, and study the proposed health care foundation that would be funded by the company's transfer to support health programs. Horizon must pay for their work.

Just last month, the state commissioned Rutgers University to conduct a "health impact study" that would investigate the conversion's impact on health care quality, affordability and accessibility, Banking and Insurance spokesman Paul Penna said. The state and Rutgers' Center for State Health Policy are negotiating cost and other terms, he said.

Still not satisfied that state law demands enough accountability, the Assembly Financial Institutions and Insurance Committee approved a bill (A3729) that would empower the Public Advocate to apply for "intervenor" status and, if necessary, subpoena records in the matter.

The bill also would require the state host at least three public hearings, instead of one now required by law, and hire an expert to assess the public impact of the conversion — a matter the consultants already are studying.

"This bill simply ensures sufficient public participation and that every issue has been carefully reviewed before a decision is reached on a conversion application," said Assemblywoman Vainieri Huttle (D-Bergen), the sponsor. "We need extra caution when moving forward on issues that could, among other things, increase premium costs and influence the health care of so many New Jerseyans."

Horizon insures 3.6 million people, including 400,000 on Medicaid.

The Attorney General and Banking and Insurance officials have already asked Horizon to respond to 700 questions since last summer, said Horizon director of government affairs John Leyman.

"The Commissioner and the Attorney General are doing an exhaustive job to protect the public," said Horizon spokesman Thomas Rubino after the vote. "This legislation adds a third regulator and it's unnecessary. It will add costs, but no additional security for the public."

State officials have not been satisfied with all of Horizon's answers during the application process, according to correspondence with the Newark-based company. Until they are satisfied, the state will consider the application "incomplete" and not move ahead.

For example, Horizon officials argue the conversion is necessary to acquire the technology and expand programs to remain competitive over the next five years. The company estimates it will need to spend from $100 million to $150 million a year — it invests $35 million a year now — to make that happen.

But when Banking and Insurance officials asked the company to detail what technology it would acquire, Horizon officials replied its investments and improvements are part of its "confidential business plan." State Insurance Director Donald Bryan said in a May 7 letter the company must answer the question and explain its "claim for confidentiality."

"Please be reminded that it is Horizon's burden to clearly and full articulate the case for conversion to for-profit status, including how the conversion will benefit policyholders ..." according to the letter.

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