The Star-Ledger

Ask The Right Questions About A Horizon Switch

The Star-Ledger — Monday, December 1, 2008

The Star-Ledger Editorials

There is uneasiness in some circles about what will happen if the not-for-profit Horizon Blue Cross Blue Shield, New Jersey's largest health insurer, converts to a for-profit company as planned.

Consumer groups have formed the Horizon Watch Coalition to keep an eye on Horizon's application as it moves through the state agencies that govern conversion. The coalition has voiced its fear that the public's interests might not be well served if Horizon makes the switch.

There will be public benefit, but only if the state does its job. The application process is the state's one chance to shape what Horizon becomes by making sure the company follows to the letter the state law that governs conversion.

A for-profit Horizon would be able to sell stock, as an alternative to raising premiums, to raise money, which is not necessarily a bad thing for policyholders. To repay tax breaks that the nonprofit company got over the years, Horizon would create a foundation endowed with money from the sale of Horizon stock and commissioned to do special health care good for New Jersey. There are estimates that the foundation could be worth $1 billion or more.

There is no reason, however, for the state to hurry through the application review in hopes of using that foundation money to solve any state budget problems.

The foundation is supposed to expand and improve what the state does in health care. New Jersey must live up to that intent, as surely as it must make Horizon live up to all that the law requires of the company.

How much money goes into the foundation will depend on how high a price Horizon can get for its stock. It would be in everyone's interest for the stock offering to take place in a favorable economic climate, which is not what exists now.

So there is plenty of time to ask smart questions. The state got off to a good beginning with its first response to the conversion application that Horizon submitted in August. It asked an appropriately long list of questions about what would happen to rates, certain hard-to-insure populations and executive compensation.

In other states, Blue Cross executives have walked away with millions in stock options. That cannot be allowed to happen here. If there is money to spare, it should go to the foundation that Horizon leaves behind, not to the executives who voted for conversion. There are safeguards in the state conversion law, including a provision that says Horizon executives can't take any stock for at least a year. Even so, the law is un tested, and the state must make sure that the Horizon brain trust does not find a way to outthink the intent of the law.

Officials should not be shy about bargaining in the public's interest — with the same tenacity that Horizon has shown when it bargains with hospitals and doctors over the rates Horizon pays.

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