Horizon Blue Cross Bill In New Jersey Sees Support, Criticism

The debate over Horizon Blue Cross Blue Shield of New Jersey's controversial plan to revamp its corporate structure continues.

Patch — December 10, 2020

By Eric Kiefer, Patch Staff

NEWARK, NJ — The debate over Horizon Blue Cross Blue Shield of New Jersey's controversial plan to revamp its corporate structure continues.

On Thursday, the state Assembly Financial Institutions and Insurance Committee heard testimony regarding a proposed law, A-5119. The bill would allow the Department of Banking and Insurance to consider Horizon's application to convert from a health service corporation to a not-for-profit mutual holding company.

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." (Read more below)

See related article: Horizon Blue Cross Of NJ Wants To Make Controversial Change

After Thursday's hearing, committee chair John McKeon (Essex, Morris), who sponsored the bill along with Assembly members Joann Downey (Monmouth), Robert Clifton (Burlington, Middlesex, Monmouth, Ocean), Robert Auth (Bergen, Passaic) and Benjie Wimberly (Bergen, Passaic), issued the following statement:

"As the health care industry changes, we must make certain that Horizon Blue Cross Blue Shield of New Jersey is put on an equal playing field. We must allow this institution to reorganize so that it may make the investments it needs to in order to provide the highest quality care and stabilize premiums for the 3.6 million New Jerseyans it insures. I want to emphasize again that this bill does not change Horizon's oversight or charitable mission in any way, and specifically prevents conversion to a private, for-profit company."

An executive at Horizon offered a pitch for the company's plan last month, which can be seen in full here.

According to William Georges, a senior vice president and chief strategy officer at Horizon:

"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 continued:

"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."

Allen Karp, an executive vice president at Horizon, said the change is motivated by "one thing and one thing only" - delivering better care for its members and improving the health of the communities Horizon serves.

Karp said the proposed legislation will remove "outdated restrictions" that limit the scope and scale of Horizon's investments, and which don't apply to its out-of-state competitors. Some of those include:

Horizon can't invest more than 2 percent of its current revenues in any single opportunity
At least 50 percent of Horizon's business must come from "commercial health insurance business"
Horizon is limited to 10 percent of its current revenues in the aggregate for all of its joint ventures and investments

If the bill is passed, and the Department of Banking and Insurance approves Horizon's application, future investments will include opportunities such as an expansion of its Neighbors in Health program. The expansion would be based on a pilot rolled out in Newark, which saw a 25 percent reduction in total cost of care and "measurable improvements in people's lives," Karp said.d

However, critics of the plan have disputed some of the claims from Horizon and lawmakers.

On Wednesday, New Jersey-based advocacy groups SOMA Action, NJ 11th for Change, Blue Wave NJ and Our Revolution Essex County raised a red flag about the plan in a joint letter to McKeon. See the full letter here.

The groups wrote:

"Under existing law, in the event Horizon converts to a for-profit entity, the fair market value of its assets must be transferred to a charitable trust for the benefit of the public. The reorganization contemplated by the proposed bill would in effect bring about such a conversion, even though the bill declares otherwise, triggering the charitable trust settlement obligation. Horizon has an estimated $7 billion in assets but the proposed bill requires Horizon to pay just $600 million up front and as much as an additional $625 million over the next 17 years. Further, there is no requirement in the bill that the monies that Horizon does pay will be used to improve public health."

Advocates continued:

"If an amended version of this legislation is to become law, it must ensure that any transfer or sale of Horizon assets from new for-profit subsidiaries triggers a commensurate charitable trust payment to the state. As under current law, the signoff of the Attorney General must be required before any restructuring is approved. The essential protections of public assets codified in the 2001 conversion law must not be effectively nullified, as in the draft legislation."

"We are troubled not only by what this bill does but also by the speed and lack of transparency with which it is being pushed through, during the holiday season in the midst of a growing pandemic, with passage envisioned as soon as the middle of this month," the groups wrote.


[TWITTER] New Jersey Citizen Action
"The lion's share of the estimated $7 billion in assets that rightfully belong to the people of New Jersey would be instead invested in for-profit subsidiaries answerable to Wall Street, not public health"

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