By Ray Gronberg and David Mildenberg
Despite a surprisingly strong rebuke from N.C. Insurance Commissioner Mike Causey, it appears likely that Blue Cross and Blue Shield of North Carolina will gain state lawmakers’ approval to facilitate a transfer of as much as a quarter of its assets to a new nonprofit holding company.
Key House and Senate leaders are supporting the changes. A dozen-plus hired lobbyists are working on the company’s behalf for the bill, which was approved Wednesday by the House Insurance Committee. The group declined to let Causey comment at a hearing.
The debate circles in part around trust, which remains a bit short for the Durham-based company that has dominated N.C. health insurance for generations.
The company has $7.7 billion in assets, a surplus of $4.6 billion and average annual profit of more than $250 million over the past four years. It’s a not-for-profit run by a board of prominent N.C. business and civic leaders, and it focuses 99% of its effort on the ninth-most populous state. About 5 million N.C. residents get insurance directly from Blue Cross or through employer- or government-sponsored plans that are managed by the company.
That’s a small business, however, compared with giant rivals CVS Health and UnitedHealth Group, which have ambitious North Carolina growth plans. While Causey says Blue Cross dominates the state market, the company contends he overstates their dominance because of rivals’ inroads over the past decade.
Blue Cross board Chair Ned Curran wrote a letter to N.C. House members Tuesday that slammed Causey for waging a “disinformation campaign. The fact that an elected official would attempt to use his office to force a private, North Carolina-based company that employs more than 5,000 people to abandon its desire to remain a not-for-profit, mission-driven organization is alarming. This is overreach, pure and simple.”
Curran noted that big insurers and tech companies are pouring billions into health care investments. Google’s fastest-growing business is health insurance, he wrote. Meanwhile, Blue Cross “is subject to outdated and overly restrictive regulatory rules that only apply to us.”
The Blue Cross letter listed several revisions in the House bill to allay Causey’s concerns and emphasized the company’s desire to remain a not-for-profit. Converting to a for-profit enterprise would make it more vulnerable to a takeover. “This is the exact opposite of our goal,” Curran said.
The insurer has excelled in creating universal brand awareness by heavy marketing and community relations efforts for decades. It has ties to many key lobbyists entrenched at the legislature.
Still, the company lacks a warm image that one might expect given its hometown roots. Causey and consumer activists such as Martin Eakes of the Self-Help Credit Union consistently raise concerns that the company is trying to reduce oversight to the benefit of the company and its executives instead of policyholders and the state’s health care providers.
The House Health committee endorsed House Bill 346 this week on a voice vote. It followed a comment by its lead sponsor, Rep. John Bradford, R-Mecklenburg, that House Speaker Tim Moore is “in full support of this bill.”
Bradford says he and others are trying to “level the playing field” between Blue Cross and for-profit insurers that have more freedom to spend money and make business deals without needing permission from state regulators.
“This is a bad bill for consumers” that will lead to increased premiums as Blue Cross shifts resources to the new holding company, Causey said at a legislative hearing earlier this week.
On Wednesday, the House Insurance committee reviewed a revised bill that included several concessions by Blue Cross.