It's not their money

There was so much going on at the North Carolina legislature over the last two weeks that folks clearly missed a bill that is moving quickly and silently through the process that will have a huge impact on taxpayers and health insurance consumers across the state.

House Bill 346, entitled “An Act To Establish A Procedure For A Hospital Service Corporation To Reorganize By Creating A Nonprofit Holding Corporation,” is a bill that would permit dramatic restructuring of Blue Cross Blue Shield North Carolina, the state’s oldest hospital service corporation and largest health insurer. This is a big deal and it is not getting the attention it deserves.

Under the current Public Trust Conversion law, if Blue Cross were to convert to a for-profit company, or radically dispose of a certain amount of assets, it must place 100% of its fair market value in a charitable trust to serve the health care needs of North Carolinians.  HB 346 would allow Blue Cross to form a new parent holding company and exempt the new parent company from the conversion law, allowing the company to keep what would otherwise go into a charitable trust.

Blue Cross was created as a non-profit organization and belongs to the people of North Carolina.  Despite what proponents of this bill might say, this is not Blue Cross’ money.  It is our money—every single taxpaying North Carolinian’s money.

Even more alarming, the bill will increase premiums for up to 4.4 million Blue Cross health insurance policyholders.  This is not conjecture but simply math.  Blue Cross has an “internal endowment” of $5 billion of investment securities.  At 5% return, this internal endowment generates $250 million per year that can be used to offset premiums, pay claims, and continue insurance coverage for less profitable service counties, like those in southeastern North Carolina.

If the bill passes, initially up to $1.9 billion can be transferred to the holding company and its subsidiaries.  Blue Cross NC could then transfer an additional $1.2 billion to the holding company.

If this big nest egg is transferred to the holding company and its subsidiaries, Blue Cross will have to make up for the lost investment earnings by increasing health insurance premiums.  And on top of that, no other health insurer in North Carolina has the competitive advantage of such a large internal endowment. This funding also allows Blue Cross NC to keep its premiums lower than they otherwise might be. Can you imagine how much we would be paying if this money goes away?

Finally, this bill would tie the hands of the Insurance Commissioner when it comes to protecting the interest of insurance consumers and taxpayers.  North Carolina has a history of balanced fair insurance regulation, but this only works when the guy who is supposed to protect us has the power to do so.

This bill has lots of problems and our policymakers need to examine it carefully, with the public’s interest foremost in their minds.  After all, it is OUR money!