(This story originally appeared in the North Carolina Tribune.)
While lead House sponsor Rep. John Bradford said he wants to address any concerns state regulators have about the measure, Insurance Commissioner Mike Causey told legislators on Tuesday he’s not convinced the bill’s even needed.
“Blue Cross should not be able to invest with the freedom of a for-profit company because it is a fundamentally different type of entity,” Causey said during a morning House Health committee hearing.
“For-profit companies make investments using stockholder money,” Causey said. “As a nonprofit hospital service corporation, any money that they’re seeking to invest, this is North Carolina policyholder money.”
Causey said he’d made that point during a weekend conversation with Blue Cross CEO Tunde Sotunde, and told him that if the insurer has extra money, “we need to give it back to the people and lower these health insurance premiums.”
He also pointed out to legislators the Blue Cross remains “the dominant company in health insurance in North Carolina,” with market shares for individual, group comprehensive and Medicare supplemental policies that run from about 80% on up.
The commissioner was responding to the argument that Bradford laid out for committee members, namely that Blue Cross needs the same corporate flexibility that its for-profit competitors and even the state’s nonprofit hospitals enjoy.
The bill would allow Blue Cross — and the Delta Dental Plans Association, the state’s other hospital service corporation — to establish and subordinate themselves to nonprofit holding companies that could gain control of many of their present assets and a freer hand to deploy them without needing Department of Insurance approval.
Bradford said the state’s regulatory scheme for Blue Cross and Delta Dental “needs to be modernized.”
“In the world of business, you have to be able to move fast when it comes to opportunities,” the Mecklenburg County Republican said. “The challenge is that when they have those opportunities, the current structure requires them to go through a lot more hoops.”
Causey said Department of Insurance officials met on Monday with Bradford and “the senators that are sponsoring” a parallel bill on their side of the capitol.
The various players are “working together on coming up with some language” that could go into a revised bill, he said.
Bradford said it had been “a fairly good meeting,” but that he’d “made it clear [Causey’s] folks had to start getting us some direction.”
He also hinted at other potential sources of discord, starting his comments with the observation that he “wasn’t even sure this was the right committee for this bill” because it’s about a corporate restructuring.
House Speaker Tim Moore, R-Cleveland, ticketed the House version of the bill for sequential reviews by the chamber’s Health, Insurance and Rules committees. The Senate version remains assigned only to that chamber’s Rules committee.
House Health members had some questions, with perhaps the most pointed coming from Rep. Timothy Reeder, R-Pitt. His is an physician who is vice chair of clinical operations in the Department of Emergency Medicine in East Carolina University’s Brody School of Medicine. Reeder has also been president of the N.C. Medical Society.
He wanted to know if Blue Cross’ intent, post-passage, was to “purchase physician practices, to purchase hospitals [and] to vertically integrate and really be competing in a different way with the other insurance companies around the state.”
CVS Health, UnitedHealth Group, Humana and other large for-profit insurers are buying physician practices and adding medical clinics.
If Blue Cross bought a hospital, it could “have information and data about that operation that would put them in a different advantage in the market,” Reeder said.
Bradford answered that the bill “doesn’t get into the details of what investments they can or cannot make.” He said that while buying a hospital would be “very capital-intensive,” what’s “more likely to happen is you will see more partnerships between existing hospitals and these HSCs, co-investing together.”