Martin Eakes says his decades-old effort to protect Blue Cross Blue Shield’s reserves for the benefit of the state’s residents is in peril.
The cofounder of the Self-Help Credit Union in Durham says supporters have the votes to pass a bill that would allow transfer of as much as $2 billion to a holding company, without returning portions of the surplus to policyholders.
Filed in March, the legislation sailed through the House. Eakes expects the same in the Senate.
Insurance Commissioner Mike Causey has said negotiations have prompted Blue Cross to compromise on less than 20% of his requests. He says the company was “dishonest and deceptive” lobbying for the bill without sharing much information with his department,
Eakes says that is an optimistic view by Causey. “I’ve studied the bill and I don’t see how anyone on earth can say he got that much of a compromise.”
Blue Cross says it needs freedom to behave more like its for-profit national competitors. While those competitors such as UnitedHealthcare and CVS Health are much larger, Blue Cross benefits from nearly $5 billion in reserves, which Eakes said provides a zero interest cost of capital under its governance structure.
Should it shift reserves to another entity, “Blue Cross will have to make up for the lost investment earnings by increasing health insurance premiums,” according to the Coalition for the Public Trust, an advocacy group set up to oppose the insurer’s proposal.
The House bill would allow Blue Cross to create another company with the same leadership that would have more flexibility to use some of the insurer’s money. The company has stressed its desire to remain a not-for-profit organization committed to improving health care in the state.
To maintain its nonprofit status, the company is subject to more regulations than its for-profit rivals. That includes holding more reserves and seeking approval on investments.
Eakes is asking lawmakers to create a study commission to ensure the changes “protect the interests of the people of North Carolina.” But supporters note the legislation has received broad bipartisan support.
The lead sponsor of the House version is Rep. John Bradford, R-Mecklenburg. Co-sponsors include the majority and minority leaders of the chamber, Reps. John Bell, R-Wayne, and Robert Reives, D-Chatham.
The Senate version’s lead sponsors are Sens. Todd Johnson, David Craven and Dean Proctor, Republicans from Union, Randolph, Catawba counties, respectively. As on the House side, the proposal has bipartisan support, including from the two Democratic senators, Mike Woodard and Natalie Murdock, who represent Durham County, Blue Cross’ home.
Blue Cross held cash and investments topping $4.5 billion, according to its 2021 financial statement. The company said it had net income of $36 million in fiscal 2022.