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Horizon CEO to Meet With NJ Lawmakers as Rhetoric Rises

Mary Caffrey
Despite rhetoric clearly at odds with how insurance companies operate, Governor Chris Christie is tapping into long-term frustration among some Democratic lawmakers with the growth and shift in mission of the state's largest health insurer.
UPDATE: After a meeting in the New Jersey State House, Horizon CEO Robert Marino reported making progress with legisltive leaders. Marino later met separately with Assembly Speaker Vincent Prieto. A deal to resolve the budget impasse and reopen state government could happen by the end of the evening.

Robert Marino, CEO of Horizon Blue Cross Blue Shield (BCBS) of New Jersey, is scheduled to meet the state’s Democratic legislative leaders Monday over the standoff that has shut down state government.

New Jersey opened the fiscal year Saturday without a budget, which required suspension of all non-essential services. Governor Chris Christie, a Republican, triggered the impasse by tying a budget deal with $350 million in Democratic spending priorities to a bill to revamp governance of Horizon, the state’s largest health insurer with 3.8 million members.

Senate President Steve Sweeney requested the meeting after a second day with no progress, as state beaches and campgrounds stayed closed on a sunny July 4th weekend. Marino will meet with Sweeney and Assembly Speaker Vincent Prieto, who has refused to post the Horizon bill, which passed the Senate Thursday. Christie’s threat to use his line-item veto to cancel Democratic spending items has left Prieto without the votes to pass the state budget.

State lawmakers were called in for special sessions over the weekend, which included a blistering address by the governor on Saturday accusing Horizon of abandoning its historic charitable role. Some Democrats say their primary aim in supporting the Horizon bill is to preserve spending priorities–and suggest it won’t survive once he leaves office. Nonetheless, Christie is trying to tap into frustration about the company that stretches back nearly a decade, when the salary of Marino’s predecessor first drew legislators’ ire.

“Its nonprofit designation and charity mission create a special relationship with the taxpayers of this state. Decades of tax breaks because of their charity designation allowed Horizon to acquire its market share,” Christie said. “I am not sure if most of our residents know that Horizon was created by New Jersey statute. The taxpayers–all of you–are the beneficial owners of Horizon.”

In fact, Horizon’s biggest period of growth, from 1994 to 2010, occurred in the aftermath of the 1992 law that removed the “insurer of last resort” status and increased its tax burden. That period saw Horizon double in size from 1.7 million to 3.4 million enrollees. The 1992 law that created the modern Horizon prioritized its policyholders, not the state at large. A tenet of the bill being debated would turn back the clock, which Horizon argues would be a gift to competitors if the company must still pay $543 million a year in taxes.

Horizon said the timing of the current bill, as Christie prepares to leave office, raises many questions. “Not once in the previous seven years has the Governor raised any issue in response to the many audits, annual reviews or thousands of pages of detailed financial filings that have been publicly filed including those detailing compensation information and lobbying expenses,” spokesman Kevin McArdle said.

Christie has taken aim at executive pay and the high-profile public relations and lobbying campaign deployed to fight current legislation, which has 3 parts: (1) revamping the board to include 3 elected members, (2) increasing transparency and reporting requirements, and (3) creating a public process for regulating how much surplus Horizon can retain, with the potential for some to be distributed for public health purposes.

Rhetoric and Reality

Medicaid. Christie’s speech Saturday contained several lines that portray Horizon as pilfering funds from taxpayer pockets. He stated he was “alarmed to learn that in 2016 they made $163 million in profit off of the New Jersey Medicaid program.” Based on Horizon’s 2016 Medicaid enrollment of 887,438 (state data contained in an independent report), that is about $184 of profit per enrollee. In a statement, Horizon said its margin is 1.9%, smallest among the Medicaid managed care organizations (MCOs) operating in the state.

“If Medicaid costs go up, we pay for it along with the federal government,” he said. “They make money no matter what. Without any risk.”

But Horizon says this is patently untrue. According to the independent NJ Health Care Quality Institute report, “The MCOs each receive the same per member, per month capitation payments from the State. The capitation rates are adjusted for age, sex, and level of medical complexity.” In fact, the report goes on to say that a chief problem with New Jersey Medicaid is that state regulations have not kept pace with the times; Medicaid contracts need to be updated to reflect that the vast majority of care occurs within MCOs, not fee-for-service.

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