For Horizon, change in corporate form will let it modernize, invest in new technologies

By Tom Bergeron
Newark | Nov 26, 2019 at 4:45 am

In a move that will dramatically change the corporate status and corporate actions of the state’s largest health insurer, Horizon Blue Cross Blue Shield of New Jersey, legislation was introduced Monday that would make it possible for the company to become a not-for-profit mutual, putting it in a position to increase investments in new technologies and innovations.

The legislation, which was introduced by Assemblyman John McKeon (D-Madison), establishes a process through the Department of Banking & Insurance that would enable the change. It quickly earned the support of state Senate President Steve Sweeney (D-West Deptford), seemingly indicating it will move through the Legislature easily.

The new corporate form would preserve Horizon’s obligation to operate for the benefit of its members and its historic not-for-profit status. It is unclear when the legislation will be put up for a vote.

Horizon Chairman, CEO and President Kevin Conlin, in a prepared statement, said the move will benefit Horizon’s members and is necessary to keep up with the times, as it will allow Horizon to make greater investments in new technologies.

File photo
Horizon BCBSNJ Chairman, CEO and President Kevin Conlin.

Under its existing corporate form, a not-for-profit health services corporation, it is severely limited in the amount of money it can invest in such companies.

“Our current structure was created decades ago, at a time that could not have anticipated that the health care system would become what it is today, let alone what it may be five years from now,” Conlin said in a statement. “This technical change to our corporate form reaffirms Horizon’s commitment to our historical mission as New Jersey’s not-for-profit health insurer, but gives us the flexibility to accelerate the pace and scale of investments that will help us continue to deliver for our members in the face of a rapidly changing health care marketplace.”

A marketplace that is rapidly including nontraditional health care companies.

Horizon spokesperson Tom Wilson put it this way:

“When you’re looking at what the Googles and Amazons and Apples of the world are doing and you’re looking at the ($69 billion) CVS/Aetna merger, you see the future,” he said. “We’re looking at all that and saying, ‘We’ve been keeping pace,’ but it’s getting harder and harder and we’re starting to bump into our own limits.”

Horizon said the move will not only benefit the company and its members, but the state economy, saying studies conducted by Rutgers University and Econsult Solutions predict that the change will produce favorable economic impacts over the next 10 years, including:

  • $4.16 billion in additional economic output;
  • 1,958 new jobs;
  • $62 million in added state revenue;
  • For every $100 million in investment in New Jersey firms, the state can expect $206 million in additional economic output.

The company said benefits from the increased flexibility from the structure change include:

  • Greater investments in new, consumer-friendly technologies such as expanded access to telemedicine and wearables;
  • New models of care and collaboration that address social determinants of health and economic barriers to positive health outcomes;
  • Additional web and mobile-based tools to help keep costs under control;
  • On-demand services to help members manage critical health services such as substance use disorder and mental health.

Wilson said the move will allow Horizon to modernize in the eyes of its members.

“There’s a lot of tech out there right now,” he said. “And, clearly, that’s where a lot of health care is moving. People who are used to transacting most of their life’s business on their mobile device are coming very quickly to expect the same when it comes to health insurance.”

The decision to seek such legislation did not come lightly. Horizon has been considering numerous structural options since Conlin took over as CEO on Jan. 1, 2018, and ordered a review of the company.

File photo
State Senate President Steve Sweeney.

Once the decision to seek a change of status and become a not-for-profit mutual was made, the company worked with key leaders and influencers in the Governor’s Office and the Legislature, answering questions and concerns as they came up.

Wilson said the process has been on going for all of 2019.

The Legislature appears to be on board, as Sweeney released the following statement in support:

“This bill will help Horizon to move forward with reforms that aid health care consumers and enhance the quality of care they receive. These changes will better enable New Jersey’s only not-for-profit health insurer to modernize the way it is organized so it can invest more in member benefits, including consumer technology and preventive care.

“They will help keep costs under control and improve health outcomes, so that medical care is affordable and accessible. For those who depend on Horizon, this change will ensure the company can continue to provide the highest quality health care into the future.”

The corporate form is not unusual for Horizon or the industry.

The not-for-profit mutual is the form adopted by Blue Cross Blue Shield plans operating in 18 other states. Not-for-profit mutual companies are owned by their policyholders, not outside shareholders, and reinvest any income generated into activities that benefit the policyholders.

Other not-for-profit mutual insurers in other industries include: Liberty Mutual, Mutual of Omaha, Nationwide Mutual Insurance Co. and New York Life.

The company would continue to be overseen by a board of directors with significant public representation, including an increased number of members appointed by the governor, Senate president and Assembly speaker.

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