On Thursday afternoon, the state Senate and General Assembly passed legislation that will allow Horizon Blue Cross Blue Shield of New Jersey to change its corporate structure to a not-for-profit mutual health insurer.
It was a significant milestone in a more-than-one-year effort by the state’s largest insurer — one that only needs the expected final signoffs from Gov. Phil Murphy, the Department of Banking and Insurance and the Attorney General’s Office.
But, how much will the change really help the state?
Horizon officials said it will do so in a number of ways — and pointed to studies conducted by Rutgers University and Econsult Solutions that say it will help the state’s overall economy in the coming decade.
The studies, which Horizon referenced while lobbying for the change, 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 insurer said the 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.
Left unsaid was this: The change will allow Horizon to actually compete against the high-tech companies — Apple, Google, Amazon and others — that have been entering the sector.
The legislation (S3218/A5119) 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 it to invest as much of its reserves as it deems necessary in emerging technologies that could help the company and its customers.
Horizon, currently organized as a not-for-profit health service corporation under the Health Services Corporation Act, is currently limited to using only 2% of its reserves for investment in any one entity, regardless of the benefits — or cost savings.
Horizon CEO Gary St. Hilaire, in a statement, said the legislation recognizes that health care is rapidly undergoing a transformation.
“Today’s vote recognizes that health care, and the expectations and needs of health consumers, are rapidly changing,” he said. “Over the past three years, countless hours of discussion, deliberation and critical thinking by many legislators, administration officials and stakeholders helped guide and improve this legislation.
“As a result, it achieves its goal of preserving Horizon’s historic member-focused mission while giving the company the flexibility to adapt and innovate to enable care that is more connected, more convenient and more affordable.”
One of the bill’s main sponsors, Assemblyman John McKeon (D-West Orange) said the ability to compete was crucial.
“Right now, the company is limited in the ways it can stay competitive to benefit its 3.6 million members,” he said. “We must allow this organization to adapt its infrastructure so that it can make the investments it needs to in order to offer stable rates, promote innovative health care services and meet the evolving needs of its members — all while maintaining its charitable mission.”
Another sponsor, Assemblywoman Joann Downey (D-Ocean Twp.), called it a “win-win” for the state.
“This is a brilliant way to let Horizon be a part of the cutting-edge health care innovations that will improve the well-being of New Jersey residents while preserving the company’s not-for-profit status,” she said. “By reorganizing in this manner, Horizon would still be the charitable insurer so many families rely on, but would also be free to help promote medical advances that everyone can benefit from.”
The legislation faced some opposition from progressive groups, but it was overwhelmingly supported by the business community.
If approved, Horizon would continue to be under the supervision of the Department of Banking and Insurance, with oversight by the attorney general. And, upon establishment of the not-for-profit mutual holding company, Horizon would be required to pay a one-time, initial assessment of $600 million to the state treasury and pay an additional $625 million to the state over 17 years after its reorganization.
This corporate form is not unusual for Horizon or the industry.
The not-for-profit mutual form has been adopted by Blue Cross Blue Shield plans operating in 18 other states. Not-for-profit mutual holding companies are not owned by investors or shareholders, but reinvest any income generated into activities and ventures that benefit the policyholders.
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.
The company, however, is happy that it now feels it has a level playing field.
When Horizon 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.”
