Asbury Park Press

Horizon Bid Bad Medicine

Asbury Park Press — Wednesday, August 20, 2008


There's nothing wrong with turning a profit. That's the American way.

But when a company that has traditionally been a nonprofit wants to go public, it can be a hydra-headed tangle of trouble, as is the case with Horizon Blue Cross Blue Shield, the state's largest health-care insurer. It's hard to imagine a set of circumstances under which state approval of Horizon's bid to convert to a for-profit would be warranted.

Horizon last week announced its intention to seek for-profit status under the provisions of a 2001 statute. The estimated $1 billion windfall to the state's coffers, which would have to be used to fund health care for the needy, is a relatively paltry sum. And if experiences in other states in which the Blues have converted are any indication, Horizon's 3.3 million insured could well face rising premiums and reduced coverage.

The $1 billion figure cited by Horizon is said to be the value of the company if it made a stock offering today. A state foundation would be created to manage the funds. When Horizon considered converting to a for-profit company just three years ago, the state estimated a stock sale would generate $3 billion to $5 billion.

"Nobody knows where those numbers are coming from," said Michael T. Kornett, chief executive officer of the Medical Society of New Jersey. In fact, an economist hired by that organization said the figure should be $8 billion.

There also is reason to be skeptical about whether the money actually would be used for the stated purpose. And there are unanswered questions about how health care for the needy, initially funded through the windfall, would be paid for once the well ran dry.

William J. Marino, chief executive officer for Horizon, said there was no reason for Horizon policy holders to be concerned about possible premium hikes. "If our prices were not competitive, we would lose members," he said. But even if the rates held, the pressure to please shareholders and goose the bottom line could mean reduced coverage and other policy changes that could hurt consumers.

"In financial terms," Marino said of the company's attempt to seek for-profit status, "it's called monetizing an asset."

Now there's a phrase sure to inspire confidence in the citizens of New Jersey and the customers of Horizon.

For the Legislature, ensuring the state's citizens are provided comprehensive, affordable health care coverage should trump all considerations – no matter how many dollars Horizon dangles before its eyes.

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