Horizon Blue Cross Of NJ Wants To Make Controversial Change

The largest health insurance company in NJ has a plan to reorganize that may affect 3.5 million subscribers. Here are the pros and cons.

Patch — December 2, 2020

By Eric Kiefer, Patch Staff

NEWARK, NJ — The largest health insurance company in the Garden State has a controversial plan to reorganize, and it's looking for a helping hand from state lawmakers.

Recently, Horizon Blue Cross Blue Shield of New Jersey announced it's pushing for legislation that would clear the pathway for changes to its corporate structure. Horizon, which has a headquarters in Newark, claims that the tweaks will give it greater flexibility to make investments, ultimately leading to more competitive premiums for its members.

But opponents of the plan allege it would allow Horizon to "take nearly $6 billion of public funds and invest it in Wall Street to the benefit of stockholders."

On Monday, the Assembly Financial Institutions and Insurance Committee met to discuss the proposed law, which would allow Horizon to convert from a health service corporation to a mutual holding company.

Assemblyman John McKeon (District 27), the sponsor of the bill, said it was about "evolution."

According to McKeon, a Democrat who represents towns in Essex and Morris counties:

"Our health care systems must be able to adapt to changing circumstances in order to truly help members. Horizon Blue Cross Blue Shield has served our state for decades and is the oldest, largest health insurer in New Jersey. While the health care field has significantly changed and advanced throughout the years, this organization has been limited in what it can do with its assets. As it currently stands, Horizon cannot make many of the investments it needs in order to provide the highest quality care to its 3.5 million subscribers. This bill would amend existing statute to allow Horizon to implement the necessary infrastructure to invest in diverse and innovative health services while still maintaining its not-for-profit mission. These changes would help Horizon offer more competitive, stable premiums and meet the evolving needs of its members."


An executive at Horizon offered a pitch for the company's plan on Wednesday...

"By taking on the commonly-used mutual holding company form — which has been adopted by Blue Cross Blue Shield plans in 18 other states — we would have the flexibility to continue working hard for our members and invest more in innovative partnerships and technologies that drive health care affordability, simplicity and quality," said William Georges, senior vice president and chief strategy officer at Horizon.

Potential investments could include:

Georges continued:

"The bill before the state legislature protects what makes our company unique. It preserves our historic mission as New Jersey's only not-for-profit health insurer with strong ties to its communities. At the end of the day, we would still be accountable to and operate for the benefit of our members, who are Horizon policyholders - not shareholders or anyone else ... Importantly, this new law will strengthen the guarantee that Horizon remains forever a not-for-profit that exists for the benefit of its members. This change means that Horizon cannot be sold or change to become a for-profit company that is owned by shareholders or investors."

Georges added:

"The legislation recognizes that, as a not-for-profit and consistent with current state law, Horizon BCBSNJ's assets - all of them - must and will continue to be used to advance our non-profit mission. And, as noted, the law will now permanently preserve Horizon's not-for-profit mission and ensure that a stronger Horizon will forever be focused on one thing only: improving the health of our members and the well-being of the communities we serve. In the event that we ever sought to become a for-profit entity — a change we have no plans to make — all of Horizon's assets would be transferred to a not-for-profit foundation aligned with the state. This provision is an important protection for the public that stakeholders have rightfully sought."


Advocacy group New Jersey Citizen Action offered a much different take on Horizon's proposal, however.

According to the group's statement, which can be seen in full here:

"Horizon is New Jersey's largest and only charitable nonprofit health insurer. As a nonprofit, they have amassed an estimated $7 billion in assets that ultimately belong to the people of New Jersey. Under state law, Horizon has a charitable mission to invest in improving access to quality, affordable health care for New Jerseyans. Now, for the fourth time, Horizon is proposing a corporate reorganization in a way that jeopardizes the mission and assets of the company that insures 3.4 million New Jersey residents. A bill being worked out with the NJ Legislature would allow Horizon to convert their corporate structure and create an unlimited number of for-profit subsidiaries. The legislation allows Horizon to circumvent current NJ law that requires their assets (estimated $7 billion) be paid to a trust fund designed to improve the health status of NJ residents or provide a similar community benefit. Instead, their conversion proposal only provides a one-time payment of $600 million by Horizon and potentially an additional $650 million for a total of up to $1.2 billion over 17 years. This payment agreement is not specifically designated to improve the health of NJ residents - and does not match the $7 billion value of Horizon. This agreement would allow Horizon to take nearly $6 billion of public funds and invest it in Wall Street to the benefit of stockholders."

New Jersey Citizen Action concluded:

"New legislation is not needed. We've had a process and protections in place since 2001 to ensure the mission and assets of Horizon are preserved for the people of New Jersey. It is a violation of the public trust to allow this reorganization to happen. The Legislature and governor have a responsibility to protect the people of New Jersey and ensure these funds are used for improving the health care of New Jersey residents."

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