Insider NJ

Lawmakers Huddle To Review Several Horizon Bill Amendments

Insider NJ — December 8, 2020

By Max Pizarro
Caucus Room

Ahead of a Thursday-scheduled hearing in the Assembly Financial Institutions and Insurance Committee, progressives want lawmakers to consider key amendments to a controversial Horizon Blue Cross-Blue Shield restructuring bill.

To that end, Maura Collinsgru of NJ Citizen Action and Renee Steinhagen of Appleseed submitted their ideas on how to improve the controversial legislation, which in its current form has all the makings of a money/power grab, in their opinion.

Their suggestions include the addition of language stating that a proposed mutual holding company must hold 100% of the capital stock of all its for-profit subsidiaries; and language specifying Horizon's charitable mission. (See details below).

Short of those amendments and a few others, including a slowed-down and transparent process, the progressives want the legislation scrapped.

Sources tell InsiderNJ that lawmakers continue to review several amendments concerning a proposed restructuring of Horizon. A not-for-profit health service corporation, the company's charitable status comes with perks, as well as an understanding the 90-year-old company has a special obligation to not only New Jersey's residents but also to the more than three million people it insures.

In the name of making them more competitive with the for-profit market, the working bill would eliminate the current tax on the company, requiring payments back to the state of 1.25 billion over the 17 years, including an initial payment of $600 million. The bill also eliminates a charitable trust replenishment, long used as the guarantee to preserve healthcare for union memberships. Progressive groups, including New Jersey Citizen Action, fear the change would leave the company open for a possible Wall Street take over.

At the very least, a trade-off of a $7 billion asset for a one time state budget payment has tremendous consequences.

According to Collinsgru and Steinhagen:

"The proposed legislation that would permit Horizon BC/BS to undertake a complete corporate restructuring has serious and not yet clearly understood health and financial implications for the state and people of New Jersey. Billions in public assets are at risk. The potential impact of the restructuring on access, affordability and health have not been independently analyzed. This bill is fatally flawed and in fact unnecessary. It is not needed for the company to restructure. It is only needed to for them to avoid triggering a charitable trust payment required under current law.

"Under the 2001 law a charitable trust payment for the full fair market value of Horizon's assets is required in the event a restructuring such as the one proposes to undertake.

"There are many protections in that law that are not included in the current proposal putting the public assets of Horizon at risk. The 2001 law is broader than just conversion directly to a for-profit stock company, as the company contends; and it would be triggered in this instance by that law's change in material form provisions. The 2001 law was intended to capture various ways Horizon could privatize with making a charitable trust payment. Horizon is in fact changing to permit private investment and private gain, which is a for profit.

"This law recognized that if and when Horizon ever wanted or needed to change their corporate form, a quest for greater profit would not supersede the public good. To uphold that principle and ensure New Jersey health care, taxpayers and the public assets of Horizon are protected there are three (3) options, the first being the most direct.

Option #1: Do not pass new legislation and instead invoke the specific provision in the 2001 conversion law that:

a. Requires the Attorney General to be involved in the approval process

i. To evaluate the fair market value of Horizon;
ii. Work on an "alternative foundation plan" by which that value would be placed in a foundation to serve the health care needs of NJ residents.

In addition,

b. Require a health impact study be done as part of the approval to fully understand how this would affect access and affordability particularly for communities of color and the remaining uninsured in our state, as set forth in S.375 (2010).

c. Increase the number of public hearings to be held.

d. Ensure that the standard of approval requires the plan to benefit policyholders and promotes the public interest.

Option #2: Amend the proposed bill in the following manner:

a. Delete provisions in the bill that declare that the current transaction does not constitute a material change in form under the 2001 Conversion Law, and acknowledge that in fact it does.

b. Amend the standards of approval to:

i. Require the plan to benefit policyholders and promote the public interest; and

ii. Require a health impact study be done as part of the approval to fully understand how this would affect access and affordability particularly for communities of color and the remaining uninsured in
our state, as set forth in S.375 (2010) and;

iii. Increase the number of public hearings to be held.

Option #3: Amend the current proposed bill to ensure that the health service corporation in fact remains a non-profit charitable corporation.

a. The mutual holding company must hold 100% of the capital stock of all its for-profit subsidiaries;

b. Specify Horizon's charitable mission (by adding an additional prong) to provide community benefits beyond their policyholders (members) by assisting the state and other non-profit safety net providers; provide affordable health care, close the coverage gap and decrease racial disparities in health access and outcomes.

c. Improve the restructuring approval process by:

i. Increasing the number of public hearings;

ii. Changing the minimum DOBI approval standard now included in the bill to be "beneficial" to policyholder instead of "not prejudicial" and must promote the public interest;

iii. Liberalizing the strict confidentiality provision that would not require Horizon to share information given to DOBI with the public;

iv. Require a health impact study be done as part of the approval to fully understand how this would affect access and affordability particularly for communities of color and the remaining uninsured in
our state, as set forth in S.375 (2010).

d. Add explicit language that a charitable trust settlement equal to the full fair market value of all the assets would be triggered by any merger or acquisition of the mutual holding company; and

e. Increase oversight of the Attorney General by requiring annual filings that detail the charitable activities and how the assets are being dispersed within the mutual holding company structure and among the for-profit subsidiaries.

These amendments and updating language throughout the bill to ensure consistency with them is the only way New Jersey residents, taxpayers and health care consumers can be fully protected, if Horizon is not making the required charitable trust payment at the time of reorganization.

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