Consumer advocates call on NJ Legislature not to rush health insurer legislation through lame duck

Highland Park–Consumer advocates today called on the New Jersey State Legislature not to rush critical health insurer legislation that would impact millions of state residents through the legislative lame duck session. A bill introduced last week by Assemblyman John McKeon (D-27) would allow Horizon Blue Cross Blue Shield, the state’s largest health insurer, to convert to a not-for-profit mutual insurer.

“This is not a bill that should be rushed through lame duck,” said Maura Collinsgru, New Jersey Citizen Action Health Care Program Director. “A change of this magnitude cannot be undertaken without all the facts.  A comprehensive analysis of Horizon’s current assets, and an independent health and rate impact assessment need to be done before legislators and the public can consider any such change.”

Horizon BCBS of New Jersey currently operates as a non-profit charitable health insurance company charged with providing insurance and serving New Jersey’s health care needs. Unlike other insurers, Horizon has no owners  and is accountable to the people of New Jersey. As such, Horizon receives special consideration under federal and state law. Changing the business structure of the state’s largest insurer could have a massive impact for New Jersey health care consumers and taxpayers.

Previous attempts have been made by the company to convert to a for-profit insurance company. Those attempts were defeated and resulted in a 2001 law that would require Horizon to make a charitable trust payment for the full value of its assets should they convert in the future. NJCA, NJ Appleseed and its NJ for Health Care coalition partners have been involved in each of these conversion attempts.

“The smallest change to Horizon’s structure could have a tremendous impact on the health care of millions of New Jersey families, as well as the broader health insurance market,” said Ray Castro, Director of Health Policy at New Jersey Policy Perspective. “This proposal is far too broad and complex to be fast tracked without a serious vetting process. It is critical that lawmakers commission an independent study to measure the anticipated impact on premiums, quality of care, and other carriers coming into New Jersey before any such proposal advances. Only then will administrative officials be equipped to make recommendations for Horizon’s corporate structure based on the facts, rather than conjecture.”

“New Jersey Appleseed is somewhat puzzled why Horizon Blue Cross Blue Shield  is yet again seeking Legislative approval to ‘materially change its form’ from a nonprofit, charitable corporation to a for-profit mutual insurance company–whose assets will be transferred to a nonprofit mutual holding company or one or more of the subsidiaries of such company— without involvement of the Attorney General, approval of the New Jersey Superior Court, and a charitable trust settlement payment at the time of conversion,” said Renee Steinhagen, New Jersey Appleseed Public Interest Law Center Executive Director.  “In 2001, the Legislature set up a procedure to be followed in the event that Horizon sought to materially change its form and relinquish its charitable mission, even if it remained a nonprofit organization with a substantially different mission or became a mutual insurance company. This procedure must be followed. The regulatory freedom that Horizon seeks through the proposed legislation by creating a new animal, not currently known under New Jersey law,  a nonprofit mutual holding company, cannot be sanctioned.”

“Over the last 25 years, Blue Cross plans in other states have frequently used mutual company structures as a stepping stone to fully convert to for-profit operation,” said Chuck Bell, Programs Director, Advocacy for Consumer Reports.  “Mutualization is a hugely significant change in state corporate form that directly affects Horizon’s value and operations, which may also make it a high priority target for merger or acquisition.  New Jersey consumers have relied on Horizon as a charitable health service corporation since the 1930s, and deserve to fully participate in this crucial decision. Legislators should not be stampeded into a lame duck vote, when Horizon is not even telling the public specifically what they have planned.  New Jersey needs to be extremely careful to ensure that Horizon’s $5 to 10 billion in charitable assets are fully protected, and that consumers are not hurt by higher prices and reduced competition from any future insurance company mergers.”

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