NJ’s Largest Health Insurance Company Wants to Change Its Structure, Sparking Concerns


NJ Spotlight

Some observers fear the proposed change could result in higher prices and fewer plan options for Garden State consumers.


New Jersey’s largest health insurance company wants to reform its corporate structure in ways it says will enable it to modernize and improve care for its current policyholders, save on health care costs over time and provide economic and public health benefits to the state in general. But questions have quickly surfaced about the concept.

Horizon Blue Cross Blue Shield insists that operating as a nonprofit mutual corporation would give it greater flexibility with investments and better access to data and new technologies, without diminishing its obligation to its 3.4 million members. Blue Shield plans in 18 other states have already made that transformation.

“Our members are and have always been Horizon’s top priority,” Horizon president and CEO Kevin Conlin said last week when the concept was first announced. “Our current structure was created decades ago at a time that could not have anticipated that the healthcare system would become what it is today, let alone what it may be five years from now.”

The proposal would mean that Horizon — a unique nonprofit entity legally bound to benefit its policy holders — could undergo a dramatic internal transformation within a few months. Legislation has already been drafted that would create a process within the state Department of Banking and Insurance to effect the change. But some observers fear the change would end the state’s ability to access a portion of the insurance giant’s assets, something current law permits if the company restructures in certain ways. They are also concerned it could result in higher prices and fewer plan options for Garden State consumers.

On a call with reporters Tuesday, a coalition of health care advocates urged lawmakers not to rush the legislation, which was introduced last week by Assemblyman John McKeon (D-Union) and quickly endorsed by Sen. President Steve Sweeney (D-Gloucester). Advocates said the bills — which have yet to be posted publicly on the Legislature’s website — could be scheduled for a hearing in the coming weeks.

Why the rush?

“This is not a bill that should be rushed through lame duck,” said Maura Collinsgru, New Jersey Citizen Action Health Care program director; lawmakers traditionally advance a number of controversial proposals at the end of a legislative session and the current two-year term will end in mid-January. “A change of this magnitude cannot be undertaken without all the facts.”

The concerns of Collingsru and other advocates are based in part on history. In the last two decades there have been at least a half-dozen attempts — spearheaded by corporate officials, lawmakers and at least one former governor — to convert Horizon to a for-profit structure. Most recently, former Gov. Chris Christie signaled his support of this change in return for an estimated $300 million annually in company funds to help the state address opioid addiction.

Health care advocates said this latest proposal is just another attempt to convert the company to a for-profit structure, but without making the “charitable trust payment” to the state required under current statute. Renee Steinhagen, executive director of New Jersey Appleseed Public Interest Law Center, called the bill an “end run” around the existing law requiring such payment and urged state officials to slow the process, carefully analyze the proposal and obtain an independent assessment of Horizon’s value.

Horizon could be worth $5 billion to $10 billion, based on the value of Blue Cross companies that have gone through similar conversions in other states, noted Chuck Bell, advocacy director for Consumer Reports. Garden State residents need to have a “meaningful voice” in what happens to these assets as the company evolves, he said, adding that Blue Cross plans in other states have used mutual companies as a steppingstone to for-profit conversion.

“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,” added Ray Castro, health policy director at New Jersey Policy Perspective. “This proposal is far too broad and complex to be fast-tracked without a serious vetting process.”

But officials at the insurance company said the new legislation is needed to help them create a more flexible structure, one that isn’t possible under the conversion law now on the books. The new entity would be able to better use data to control health care quality and costs, invest in wearable devices and tele-health technology, and make business decisions that would allow it to be less dependent on premium revenue, they said. It would also allow Horizon to expand certain product lines, like the increasingly popular Medicare Advantage plans.

Insist that consumer protections would be preserved

Horizon representatives insist that the reform — which would require a public hearing as part of the banking and insurance department’s review process — would not eliminate their nonprofit mandate and that consumer protections would remain strong. While the draft bill notes the new entity could be sold or merged, company officials said that kind of change would still trigger a formal review by DOBI.

Under the proposal, the new entity would pay assessments to the state Treasury of no more than $200 million a year or up to $1 billion over seven years, based on its revenue, spending and other factors. Company officials said these payments are not the same as the charitable trust payments required under state law if the company were going to become a for-profit, since Horizon would remain a nonprofit under the new plan; instead, these are designed to offset some of the tax payments the state would lose as a result of the change.

Horizon now pays taxes at rates up to eight times higher than its competitors as a result of its unique status in state law, company representatives said, totaling nearly $363 million in state and federal payments in 2017; it was not immediately clear how much the change would cost New Jersey in lost taxes.

“Horizon is unwavering in its commitment to serve our members and the health of New Jersey’s communities,” company spokesman Tom Vincz said, noting that it appreciated the input from advocates. “Horizon is committed to an open and transparent process, to our not-for-profit mission, to our members, and to the health of New Jersey’s communities. We look forward to continuing to work with the advocates, other stakeholders, and the sponsors to identify common ground to move health care forward for New Jersey.”

But advocates said that while they appreciated Horizon’s efforts to inform them of the process in advance of the bill’s announcement last week, they are not yet convinced it is the right path forward. “We’re not looking to amend the bill we have in our hands,” Collinsgru said. “That assumes we’re working on a good premise and a good bill and right now that’s still in question.”

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