Twenty-five years ago, when a powerful state senator quietly and suddenly advanced a bill that would have allowed the leaders of Blue Cross Blue Shield of North Carolina to transform the giant and successful health insurance nonprofit into a for-profit company, advocates, consumers, average citizens, and ultimately, the full General Assembly, took a stand.
For more than a half-century, Blue Cross had been afforded all manner of public assistance and preferential treatment in the form of tax and premium breaks as it grew into massive institution that employed thousands of people who served millions of customers. So state legislators passed a law mandating that if Blue Cross converted to a for-profit, it wouldn’t be allowed to leave the state’s residents high and dry. Instead, the law specified that the would-be converters could have the name, but its assets would be transferred to a publicly controlled charitable trust for the benefit of the state’s citizenry.
In so doing, the legislation protected and preserved a vital public asset and ensured the nonprofit’s directors could never realize a massive, publicly subsidized windfall.
The strength of the 1998 law was validated five years later when Blue Cross started a conversion to a for-profit. But Blue Cross abandoned those plans amid worries that consumer premiums would rise and the insurer’s concerns that “conversion could result in the company being subjected to regulatory restrictions that would make Blue Cross less competitive….”
Now, however, as Lynn Bonner reported on Monday for NC Policy Watch, Blue Cross is back trying for yet another bite at the apple:
“House Bill 346 and Senate Bill 296 would allow Blue Cross to create a ‘holding corporation’ into which it could transfer assets, property and ownership of subsidiaries. The holding corporation would not be subject to insurance company regulations.”
What this means, as a practical matter, is that Blue Cross would be able to establish a nonprofit holding company exempt from the 1998 law. The new company could then make all manner of deals and quietly transfer nonprofit value to for-profit uses. The original Blue Cross corporation would remain, but it would literally be a shell of its former self and, as such, the idea of transferring its assets to a public trust be meaningless.
Interestingly, the politics surrounding the legislation, which is scheduled to be heard for the first time in a House committee on Tuesday, are reminiscent in many ways of those that surrounded the initial conversion proposal.
Like its original counterpart, the 2023 bill was introduced quietly and without fanfare by an enormously powerful sponsor (or, in the present case, a raft of sponsors) — the kind of backing that normally spurs the impression that the bill is, as the saying on Jones Street goes, “wired.”
But another striking similarity that’s arisen in 2023 involves the rapidly mounting opposition: As it was a quarter-century ago, that opposition is passionate and convincing.
What’s more, one of the most important leaders of the anti-conversion opposition from the 1990s is still on the job: Martin Eakes the charismatic MacArthur Foundation “genius award” winner who founded and leads the Durham-based Self-Help Credit Union, and who also helped lead the initial fight against Blue Cross going for-profit.
Eakes shows no interest in allowing the new legislation to sail through. He told Lynn Bonner with characteristic bluntness and persuasiveness that the proposal is “a betrayal of the public trust” and made clear he would be helping to spearhead efforts to stop it.
Eakes and company are marshaling a formidable opposition team, including Nicole Dozier, the leader of the North Carolina Justice Center’s Health Advocacy Project, which also played a key role in the 1997-98 battle, and current Republican state Insurance Commissioner Mike Causey, who blasted the new bill as “a backdoor route to get around the conversion statutes the General Assembly passed in the 1990s [that] undermines the ability of the Department of Insurance to regulate for the public interest.”
Their shared and powerful message: The legislation constitutes a cynical effort to evade the 1998 law and drain Blue Cross’s publicly subsidized assets for private gain, and it needs to be stopped.
Of course, none of this means that Blue Cross isn’t or hasn’t been a generally solid public citizen down through the decades that’s served the state well. Indeed, State Treasurer Dale Folwell’s recent decision to oust Blue Cross from its role as the administrator of the State Health Plan was a highly questionable act based on questionable criteria that seems likely to significantly and unnecessarily disrupt the healthcare of thousands of North Carolina state employees, retirees, and their dependents. Indeed, it’s hard not to wonder if the new conversion proposal might be in some way connected to that decision.
That said, there’s also no getting around the fact that Blue Cross was established by, and for the benefit of, the people of North Carolina. Ultimately, it belongs to us and legislators should say ‘no’ to this blatant attempt to loot its assets.
Rob Schofield, director of NC Policy Watch, has three decades of experience as a lawyer, lobbyist, writer and commentator. Republished from NCPolicyWatch.org.
