Global Courant 2023-04-28 21:05:03
North Carolina’s leading health insurer could be able to reorganize through a method that nonprofit leaders say would keep it nimble and competitive with for-profit rivals, under legislation passed by the state House on Thursday.
The measure, which would allow North Carolina-based Blue Cross Blue Shield and a dental insurance company to complete a restructuring by establishing parent holding companies, passed with bipartisan support despite strong criticism from state insurance commissioner Mike Causey.
“The intent of the bill is to create a more level playing field for those two,” said Representative John Bradford, a Mecklenburg County Republican who led the legislation in the House. “The healthcare industry is fiercely competitive and rapidly changing.”
BIPARTISAN NORTH CAROLINA BILL THAT BLUE CROSS AND BLUE SHIELD WOULD RESTRUCTURE PROGRESS IN STATE HOUSE
After an 86-26 vote in the House for approval, the bill now moves to the Senate.
The move would allow Blue Cross, the state’s dominant insurance company, and Delta Dental to transfer cash and other investments from current hospital service businesses to new shell companies led by the same executive leadership. Blue Cross could use those assets to, for example, acquire other companies to expand its services. The proposed holding companies would remain fully taxed nonprofits.
But Causey, a Republican, said the asset shift could allow Blue Cross to circumvent a state law limiting its reserves and would ultimately require the company to pay back some of that money to its policyholders, who have more than 4 million, or lower rates.
North Carolina insurance commissioner Mike Causey talks to reporters about a bill that would see Blue Cross Blue Shield reorganized in Raleigh, North Carolina on April 24, 2023. (AP Photo/Hannah Schoenbaum) (AP Photo/Hannah Schoenbaum)
Other opponents of the bill also said they fear the change could contribute to higher premiums, especially for many lower-income people who rely on Blue Cross products.
“It’s a lot of North Carolinians who are affected by this bill,” said Representative Deb Butler, a New Hanover County Democrat, who pushed for more work on the measure. “And if we misunderstand this, it’s going to be a catastrophic situation.”
Blue Cross board chairman Ned Curran told House members in a letter Wednesday that there was nothing in the measure that would increase premiums, and that Causey still has the power to approve or deny premium rates.
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Curran and Bradford also pointed to changes made to the original bill that could address concerns from Causey’s insurance division, the North Carolina Medical Society and others.
The bill “will improve the health and well-being of North Carolina and its communities,” Blue Cross said in a press release thanking members of the House of Representatives for voting.
A change this week caps the amount of the company’s “admitted assets” transferred to the new holding company upon reorganization at 25%. The holding company would also be required to file annual audited financial statements with Causey, disclose compensation for its highest-paid executives and disclose the company’s “strategic investment activities.”
The reorganization option “is something that is necessary for a North Carolina company,” says Rep. Jason Saine, a Lincoln County Republican and a senior budget writer. “And we’ve worked hard to reduce regulation and make it easier for companies in our state to do business. This is the same process.”
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Majority Leader John Bell of Wayne County and Minority Leader Robert Reives of Chatham County are also among the bill’s top sponsors. Senate Majority Leader Phil Berger this week expressed his support for a reorganization proposal.
For decades, Blue Cross was able to accumulate tax-free wealth until a federal law in 1986 ended the long tax exemption. The insurer is subject to more regulation than for-profit companies operating in the state, including a mandate of higher reserves.
A law passed in the late 1990s would require Blue Cross to transfer its total stock value to a charitable foundation if it ever turned into a for-profit company, with the proceeds intended to improve health care for state residents . The bill says that the value of the intended holding company would be part of that value calculation.
Blue Cross is a key policy player at the General Assembly, where it has more than a dozen registered lobbyists. The PAC employee gave more than $250,000 to legislative campaign committees in 2022, according to reports filed with the state Board of Elections.
