The Star-Ledger

Q&A On Horizon Blue Cross Blue Shield Conversion

About the giant insurer and its sense of timing

The Star-Ledger — Wednesday, June 25, 2008

By The Star-Ledger Continuous News Desk

Q: What is Horizon?
A: The forerunner of Horizon Blue Cross Blue Shield of New Jersey was created in 1932 by the Associated Hospitals of Essex County as a not-for-profit provider of health insurance. Today it is the state's largest health insurer, with some 3.4 million members.

Q: Why does it want to switch to a profit-making enterprise?
A: Besides being able to earn profits, it would have more freedom to compete in a rapidly changing health care marketplace, since it would face less state regulation. It already has one for-profit subsidiary, Horizon Healthcare of New Jersey, a health maintenance organization.

Q: Why now?
A: Horizon has been pondering the transition for more than a decade. It publicly put the prospect on hold in June 2005 after failing to reach an agreement with state officials. With major changes in health care now being discussed by the two presidential candidates, the board of directors decided it made sense to seriously reconsider the conversion, a company official said today (June 25, 2008).

Q: What's in it for the state?
A: Horizon has to reimburse New Jersey for several decades' worth of tax breaks it received as a not-for-profit. Senate President Richard Codey (D-Essex), who authored the 2001 law that cleared the way for the conversion, said the state may get as much as $3 billion over a three- to five-year period. A nonprofit foundation will have to be set up to decide how to divvy up the windfall.

Q: How would Horizon pay the state?
A: It would sell stock.

Q: How soon could the conversion happen?
A: It first would have to be approved by the Department of Banking and Insurance and the state Attorney General's Office. The insurer's board of directors has directed company officials to prepare an application to the state, though it isn't certain when (or whether) it will be filed. Officials have estimated the state review period could take as long as 15 months and will require at least one public hearing. The conversion will not need legislation to become final.

Q: How could it affect consumers?
A: Advocates say the change could create a more nimble, financially strong company that could adjust better to market changes. Opponents fear the change would drive up rates, lead to less quality care and make insurance harder to obtain, particularly for the poor. They also believe Horizon could become a ripe target for takeover.

Q: How could it affect taxpayers?
A: It would help ease pressure on the state budget if the foundation agreed to use the proceeds to pay for such expenses as hospital charity care. It also could be used to help finance a universal health insurance program.

Q: Who would support this?
A: Horizon would have some prominent legislators in its corner, including Codey.

Q: Who might oppose it?
A: A coalition of groups in 2005 opposed accepting any windfall from Horizon simply to plug a budget hole. They included New Jersey Citizen Action, AARP, Consumers for Civil Justice, Consumers Union and Hemophilia Association of New Jersey. The Medical Society of New Jersey also has voiced concern about the conversion.

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