State Insurance Commissioner Mike Causey says he told the CEO of Blue Cross Blue Shield of North Carolina that the company has made few of the compromises he’s pushed for in the company-backed regulatory reform bill.
“CEO Tunde Sotunde said, `We’ve given you 90% of what you asked for,’” Causey said Thursday. “I said it’s more like 15% or 20%. You’ve put out a lot of words, but it doesn’t mean a thing when it comes to protecting Blue Cross policyholders.”
The N.C. House passed House Bill 346, by a 86-26 margin last week, to give Blue Cross the ability to create a nonprofit holding company that would become the parent of the 90-year-old insurance company, along with current and future subsidiaries.
Thirty-five of the 50 N.C. senators cosponsored a similar initial bill, which has been amended after Causey’s opposition. The Senate is expected to pass the bill over the next week, but he pleaded for a slower pace. “It is way too important to be rushed through,” he said.
Blue Cross’ desire to shift some of its $4.6 billion of reserves into a new holding company stems from its strong financial position, he says. Having a robust reserve means the insurer is close to triggering a state-mandated conversion target that could require the company to return some of its reserves to policyholders.
“The issue is they have so much money accumulated that they are close to the trigger conversion statutes,” Causey says. “I’d rather that they lower their reserves by returning some of that money to policyholders through lower premiums or rebates.”
Supporters said there are sufficient safeguards and questioned his prediction of higher insurance premiums.
Blue Cross, in a statement Wednesday, noted that the company and a new holding unit would remain not-for-profit and that a conversion to for-profit ownership would require placing “the value of the entire holding company and subsidiaries … in a foundation for the benefit of North Carolinians.”
The company added, “HB346 has been strengthened with multiple consumer protections to ensure transparency and accountability to address the commissioner’s concerns.” It adds, “The bill provides regulatory relief to allow more investments to improve health care, while requiring that Blue Cross NC and its holding company remain true to the not-for-profit mission.”
The commissioner, who is a Republican, says he has “no sympathy” for the view that Blue Cross needs more flexibility to compete with much larger insurance rivals such as UnitedHealth and CVS Health, which owns Aetna.
“I admire what they are doing to become more competitive, but I don’t think they should be using a false argument,” he says. Department research shows that Blue Cross remains dominant in both personal and group health markets in North Carolina. The company is “different from every other insurer because they were formed by doctors and created for the benefit of North Carolina policyholders. They are trying to act like an investor-owned company.”
The initial Blue Cross bill had no limits on how much that Blue Cross could transfer, but the current version is “25% of admitted assets,” which Causey says could still top $2 billion.
Blue Cross plans in Mississippi and New Jersey have won similar regulatory freedoms from lawmakers in recent years, which Causey says has led to higher premiums and less transparency.
The commissioner called Blue Cross “dishonest and deceptive in how they filed this bill. They worked with law firms and lobbyists and didn’t share with the Department of Insurance anything other than what little they wanted to tell us.”
The insurance department has received hundreds of emails, calls and letters from the public “and not one person has stated that they disagree with our position. I’m very concerned that consumers’ concerns are falling on deaf ears.”