N.C. Insurance Commissioner Mike Causey spoke out against an N.C. House bill that would allow Blue Cross Blue Shield North Carolina to create a holding company in which it could move policyholder money. Causey said the bill is a bad idea, mainly because the company would be deregulated.
“Even with simple corporate transactions, the devil’s in the details,” Causey said. “I say with this bill, the devil’s in the lack of details.”
He outlined his concerns at a press conference Monday.
Currently, BCBSNC is organized as a “hospital service company” and is regulated by the NCDOI. Under H.B. 346, Reorganization & Economic Development Act, BCBSNC would transfer the entire ownership interest in the hospital service corporation to the holding company and would lack the same regulation as it has now. It would also allow executives to move a portion of $4.6 billion in policyholder reserves to the holding company.
Causey also said the bill allows BCBSNC to circumvent statutory limits on reserves that would otherwise require money to be returned to policyholders or reduce rates, which will more than likely raise rates for everyone with the company’s insurance.
Currently, reserves can have no more than six times the company’s average monthly expenditures. Once the threshold is reached, the excess amount must be returned to policyholders either as a refund or reduced rates. The bill would allow the excess amount to be transferred to the holding company instead.
Finally, it has no limits on how the holding company invests policyholder money to ensure it benefits North Carolina policyholders. Causey is concerned that by allowing investments in out-of-state companies with no regulation, it would have a serious impact on policyholders and possibly raise rates.
“Blue Cross was created and organized as a nonprofit corporation, and for decades they enjoyed a lot of tax advantage in this state that other insurance companies didn’t have,” Causey said. “It was created to offer health insurance to North Carolina citizens. Blue Cross North Carolina’s nonprofit status and how the proposed reorganization impact is what’s at the heart of my concern.”
He said the proposed bill must give the NCDOI jurisdiction over the holding company, and there should be reporting requirements, not just requiring financial statements. Without stronger reporting requirements, he said, they will not know certain things about the holding company that currently is being reported by BCBSNC, like what it pays directors and executives.
“It doesn’t appear that this bill gives the commissioner of insurance the meaningful oversight to protect consumers and the public interest from whatever may happen,” said Rep. Donna White, R-Johnston, at the press conference. “This bill seems to stifle competition from the health insurance marketplace, leaving consumers, which I’m concerned about, with even fewer choices. This company already has tremendous business ability and dominates the insurance market here in North Carolina.”
In a phone interview Monday with Carolina Journal, Causey said under the current statute, the insurance commissioner can set up a court date within 60 days of the filing of a change in rates for any type of insurance, including health, auto, or homeowners, if the commissioner disagrees with the company’s request.
Causey’s office emailed the following to CJ:
“According to state law (G.S. 58-65-40), the Commissioner may deny them if he finds the rates to be ‘excessive, inadequate, or unfairly discriminatory; or do not exhibit a reasonable relationship to the benefits provided by such contracts.’ If the Commissioner denies the rates, the insurance company may refile them. The Commissioner and the health insurer can also reach a compromise regarding the requested rates.”
Causey has not set up any such court date for a health insurance company since he took office in 2017.
He said he and his office have met with legislators, including Rep. John Bradford, R-Mecklenburg, one of the bill’s co-sponsors, and officials from BCBSNS for weeks. Despite the time spent, he said his office received very little in the way of concessions.
“The language that we would need to see, unfortunately, was either ignored or very much diluted to the point that I think I can safely say that one of five items [Causey’s office wanted] was included in a proposed committee substitute,” Causey told CJ. “But the last conversation I had with Rep.Bradford is that was all they were willing to do. We could agree to disagree and see how it shakes out. So we have tried to work with them.”
Regarding premiums increasing if BCBSNC is allowed to invest in out-of-state companies under the bill, Causey said it isn’t just him or his office saying this.
“That’s coming from actuaries and attorneys and financial experts that have looked at it, and that’s what they’re all saying, and I’ve not seen a single person that has studied this that said, ‘Oh, it’ll help,’” he said.
Mitch Perry, BCBSNC senior vice president and chief financial officer, told CJ in a phone interview on Monday that BCBSNC was perplexed as to why Causey would raise the points he had in his press conference.
“Some of the same issues that are addressed in the bill are continuing to be raised as issues, so I’m not really certain why, but many of the issues that he raised have been addressed or are being addressed as part of the bill,” Perry said.
Sara Lang, spokeswoman for BCBSNC, said, “We have engaged in months of good-faith discussions with Commissioner Causey that have resulted in strengthened consumer protections, transparency, and oversight. Importantly, the Commissioner and his allies are also asking for even more burdensome regulations that would raise costs and make conditions less favorable for consumers.”
Perry countered Causey’s claim about the bill raising health care premiums.
“I don’t know of anything that’s in this bill that would increase healthcare cost,” he said. “The underlying factors driving healthcare costs haven’t changed. If anything, they’re becoming more and more complex.”
He said that Causey and his staff know that state lawmakers, the stakeholders, and the insurance company have worked to ensure that provisions in the bill support their customers and North Carolinians.
“One of them is that any investments made by the holding company specifically must support the mission that we have as a company for better and more affordable healthcare for our members and for North Carolina,” Perry said. “Our mission isn’t changing. We’ve been focused on how do we make healthcare better and more affordable, and that’s what we’ll be focused on going forward. And the bill specifically states that.”
Perry said the insurance company is committed to providing access to care at the most affordable level possible but that they need the flexibility to make investments on behalf of customers for their future care.
“We got limitations on what we can invest and how we can invest, and we’re the only ones that are subject to those,” Perry told CJ. “And we feel like it’s important as a non-profit to be in a position to continue to make those types of investments going forward.”
He said BCBSNC continues to be subject to all insurance regulations, and the flow of funds from the insurance company would be subject to regulation. Also, solvency and capital adequacy requirements that ensure BCBSNC has the reserves to meet its current and future obligations continue to exist.
Perry said they are making these changes to try to alleviate the driver of increased premiums, which is rising healthcare costs.
“The commissioner and his team are very much actively involved in working with us, and then ultimately, they are the ones who approve the rates,” he said.
The bill, discussed Tuesday in the House Health Committee, moves on for further discussion in the House Insurance Committee Wednesday.