The efforts of Horizon Blue Cross Blue Shield of New Jersey to change its corporate form to a more modern structure — one that would enable the nonprofit to invest a far greater amount into emerging technologies — got a big boost this week when bills S3218/A5119 advanced out of committees in the Legislature.
On Tuesday, the bill cleared the Senate Budget and Appropriations Committee. On Monday, the bill cleared the Assembly Financial Institutions and Insurance and the Senate Commerce committees.
Both the state Senate and the General Assembly are expected to vote on the bills by Thursday, the last voting session of the year.
If approved by the respective houses, the bills would need to be signed by Gov. Phil Murphy. After that, the change in corporate form still would have to be approved by the Department of Banking and Insurance and the Attorney General’s Office.
The passage of the legislation would amend the Health Services Corporation Act and create a process under which Horizon could apply to the state to become a not-for-profit mutual health insurer — a designation that would enable Horizon to invest as much of its reserves as it deems necessary in emerging technologies that could help the company and its customers, such as telemedicine.
Horizon, currently organized as a not-for-profit health service corporation under the Health Services Corporation Act, is limited to using only 2% of its reserves for investment in any one entity, regardless of the benefits — or cost savings.
With more than 3.6 million covered lives, Horizon is easily the biggest insurer in the state.
Assemblyman John McKeon (D-West Orange), the chair of the Assembly Financial Institutions and Insurance Committee and one of the sponsors of the bill, was thrilled it is advancing.
“Today was another step in permitting Horizon Blue Cross Blue Shield of New Jersey to be able to take advantage of innovations and medical advances enabling them to better support the well-being of their members and stabilize premiums,” he said.
“This reinforces their longstanding not-for-profit mission, ensures the strictest of scrutiny by the Department of Banking and Insurance as well as the attorney general, and guarantees they will not seek to become a venture that puts profits over people.”
A number of consumer watchdog groups, including New Jersey Citizen Action, have questioned the move.
Maura Collinsgru, its health policy advocate, release this statement Monday.
“The bill would let the company convert to a for-profit company in everything but name,” she said. “Health care consumers in New Jersey should not be fooled into thinking this is to their benefit. The bill will let Horizon skirt their most fundamental obligation to their charitable mission and move the $7 billion plus in charitable assets into private business ventures, freely as they wish.”
Efforts by Horizon to change its corporate structure last November were stalled over these concerns, something Horizon has strongly suggested was never the intent. These bills seemingly would take such a conversion off the table.
Under the legislation, a reorganized Horizon still would need to comply with all of the existing HSC Act coverage requirements.
Horizon Blue Cross Blue Shield of New Jersey Executive Chairman Kevin Conlin made his case to legislators earlier in the month. He said the change in structure is needed to compete with the private equity and public company innovators and disruptors in the space, including Amazon, Google and Apple.
“Given how few structural barriers these for-profit insurers and tech companies face, they have been able to move quickly to engage select opportunities and populations — all of which they can pick and choose,” he said. “Some of these tech giants and competitors have also dramatically reshaped consumer behavior and expectations.
“Consumers now routinely use their phone to pay their bills, order their groceries or video chat with family and friends. Even in health care, consumers are demanding more. They want high-quality care that is more convenient, more connected and more affordable.”
Conlin said Horizon must change to meet — and match — this coming change. It is a difficult balancing act, he said.
“Unlike our for-profit competitors, who focus on delivering value to their shareholders and make decisions based on financial reward, Horizon is a New Jersey-based not-for-profit,” he said. “Our focus is on delivering value for our members, not shareholders. How does that difference play out? Two of the most challenging insurance markets paint a clear picture.
“Faced with difficult market conditions that threatened profitability, many of the for-profit insurers stopped offering plans on the Affordable Care Act exchange that cover more than 300,000 New Jerseyans. Horizon remained and responded by developing new, high-quality products that actually lowered the cost of coverage. Similarly, while the national for-profits cherry picked their way across the state offering Medicaid coverage in only the counties they choose, Horizon offered a Medicaid option in every ZIP code across New Jersey.”
Move Health Care Forward New Jersey, a group headed by longtime New Jersey executive Dennis Bone, also issued a statement in support of the bills.
“This legislation has undergone dramatic changes from the concept that was first introduced last year,” he said. “Horizon — working with the Governor’s Office, legislative leadership and the bill’s sponsors — has been willing to address all the major concerns raised by stakeholders.
“That’s why this legislation makes clear that Horizon will continue to operate under its charitable and benevolent status, will continue to fall under the same regulations and guidelines from the Department of Banking and Insurance as well as the attorney general, and that there are no stockholders, nor will there be a conversion.”