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NJ's Horizon BCBS Bill Could Expand Charitable Status, but at Cost of "Blue" License

Mary Caffrey
Legislation would give New Jersey's top insurance regulator new powers over Horizon's surplus, which the Blue Cross Blue Shield Association said would cause it to terminate Horizon's license. The bill also restores "insurer of last resort" status, which was abandoned in 1992.
A months-long standoff between New Jersey Governor Chris Christie and the state’s largest health insurer will reach a climax this week, and before it’s over Horizon Blue Cross Blue Shield (BCBS) may have to give up the “Blue.”

Governance changes before New Jersey's Democratic legislature are so far-reaching that the Blue Cross Blue Shield Association (BCBSA) warned Thursday that Horizon BCBS could lose its license—and be charged a $400 million withdrawal fee—if lawmakers don’t scuttle their plans. These include overhauling Horizon’s board, replacing 3 members with those elected by subscribers, and giving the state’s Commissioner of Banking and Insurance new powers to manage the insurer's surplus. BCBSA says this amounts to letting regulators run the insurer as an “arm” of the state.

Scott P. Serota, president and CEO of BCBSA, said Christie's early plan "goes significantly beyond what is typically required by other states," and creates "the precise type of situation the license agreements prohibit" to ensure independence. All this was before the insurer saw a bill it believes is a bigger threat.

What started as a fight about money—Christie wanted $300 million from Horizon BCBS for an opioid treatment fund—has evolved into a debate about transparency, executive pay, and what the insurer's mission should be. On Thursday, Senator Joseph Vitale, a veteran Democrat and his chamber’s healthcare expert, introduced a bill that would expand Horizon BCBS's charitable and public health mission and restore its “insurer of last resort” status, which the $12 billion insurer hasn't seen since it escaped bankruptcy a generation ago. More financial information for "health services corporations," which uniquely applies to Horizon BCBS, would be publicly available.

A 1992 law revamped New Jersey’s individual market to spread the risk among multiple insurers, while increasing Horizon BCBS’s tax burden. That law laid the groundwork for the company that today insures 3.8 million people and covers 49% of the market. Many still assume Horizon BCBS is a nonprofit, but it is actually a not-for-profit that dwarfs competitors. That may be what's going on here: any move Horizon BCBS makes in New Jersey's healthcare market has an outsize effect. Many Democrats were unhappy with a tiered health plan the insurer launched in 2015, and there are rumblings that the Horizon feud is a smokescreen to bolster a competitor with political ties.

While Democrats who lead New Jersey's Legislature are in no rush to let Christie touch Horizon's surplus, other arguments have touched a nerve.

Senate Majority Leader Loretta Weinberg, in a blog post Sunday, wrote, “I don’t agree with the Governor’s style or his negotiation tactics. But I do believe that Senator Joe Vitale has come up with the right compromise to bring us to an appropriate solution. … Some of the components in Senator Vitale’s bill have been discussed by Democrats for years."

Vitale’s bill will be one of the interlocking parts needed to push New Jersey’s Fiscal Year 2018 budget over the line, before the the current year ends June 30. Christie is historically unpopular, but he still has a Constitutional power tool: New Jersey governors can strike through individual budget items and kill legislators' pet projects, and this year Christie can also weigh in on a revamped school funding formula. Over the weekend, it appeared Christie would refuse to sign the budget or the school funding plan without getting something from Horizon. He called a news conference Thursday to chastise the insurer over $16 million in fines relating to Medicaid program administration. However, no details are available because the insurer disputes the findings.

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