The deal that reopened state government leaves the state's largest insurer with more oversight than when it began, but Horizon avoided loss of control of its board, and its reserves will not be redirected to a "wellness fund."
Governor Chris Christie signed a $34.7 billion budget deal early today to reopen state government, which came with a new governance plan for the state’s largest health insurer, Horizon Blue Cross Blue Shield (BCBS) of New Jersey. Â
TheÂ deal brokeredÂ directly with Horizon CEO Robert Marino turned on 3 key items. Horizon prevailed on all:
Â·Â Â Â Â Â Â Â Â A proposal to replace 3 current members of Horizon’s board with 3 elected subscribers was scrapped for a plan that retains 11 members selected by Horizon, 4 selected by the governor, and 2 new members selected by Legislative leaders. This makeup eliminates fears of a hostile takeover by a competitor.
Â·Â Â Â Â Â Â Â Â Legislators scrapped plans to restore Horizon’s historic role as the “insurer of last resort,” which the insurer said would have harmed its competitive position.
Â·Â Â Â Â Â Â Â Â State regulators will hire an independent actuary to determine if Horizon’s risk-based capital (RBC) ratio exceeds 725%; if it does, reserves above the cap will be returned to policyholders. An earlier plan set no parameters for determining “excess” and would have created a wellness fund with Horizon reserves, to be dispersed by the Legislature. Horizon's 2016 annual report puts its RBC well below the cap.
The plan retains features to increase Horizon’s transparency, improve reporting of executive pay, and make this information available to the public on the state’s website.
In February, Christie called on Horizon to offer $300 million from its $2.4 billion in reserves toward a fund to pay for opioid treatment, which he has made his signature cause of his final year in office. From there, talk turned to a broad debate about Horizon’s governance, its mission, and the makeup of its board. Horizon covers 3.8 million people, but most of its growth came after a 1992 state law to repair New Jersey’s individual market, which unburdened the company from carrying all the state’s worst risks.
The deal came after a day of meetings Monday among Marino and the Democrats who lead New Jersey’s legislature: state Senate President Steve Sweeney, Assembly Speaker Vincent Prieto, and Senator Joseph Vitale, long considered the expert on healthcare matters. Vitale had sponsored a bill with reforms directed at Horizon that set off a weeklong public relations blitz, with support for the company coming from the state’s entire business and labor apparatus.
Vitale’s bill passed the Senate Thursday, but Prieto refused to post it in the Assembly. Christie said without the Horizon bill, he would use his line-item veto to cancel out $350 million in Democratic spending priorities, including a school funding overhaul that Sweeney has sought for years. The standoff left New Jersey without a budget as the fiscal year began early Saturday, triggering the shutdown.
Late Monday night, Christie said the process yielded plenty. “All I sought were 2 things: increased transparency and accountability for New Jersey’s monopolistic health insurance company, and an end to their hoarding of subscriber and taxpayer money, leading to increased premiums and a decrease in their charitable responsibilities,” he said.
Horizon comes away from the process with more oversight than in the past. But it retains control of its board, a key concern given the fear that Christie’s public thrashing was a cover to weaken the company at the behest of a well-connected competitor.
In a blistering address Saturday, Christie said the state had created Horizon and fostered its growth, and the insurer owed more to its taxpayers. Asked whether the dialogue over the insurer’s role in New Jersey would continue, Prieto said that Horizon “had been a creature of the state,” when founded 85 years ago, “but they are not of the state.”
Horizon is a private company, although the “charitable” role spelled out in statute will continue, the speaker said.
In a statement, Horizon said the compromise “achieves a goal we established when the governor first introduced the idea of taking our reserves. Horizon could only agree to legislation that is reasonable, avoids higher costs for our members, and that does not impose unfair or excessive obligations.”