Monday, August 18, 2008

New Jersey Blue Cross Converting to For-Profit

The New Jersey Star-Ledger reports that Horizon Blue Cross/Blue Shield, the state's largest health insurer, is seeking to convert to for-profit status. The conversion is regulated by state laws, and therefore needs several state approvals before it could move forward. An earlier attempt by Horizon to convert to for-profit status was abandoned three years ago in face of opposition by state governmental leaders.

The conversion attempt has raised the familiar arguments. Horizon asserts that conversion will allow it to access the private capital markets, a necessary step to remain competitive. Opponents argue that the result of conversion will be a loss of insurance options to poorer residents, as Horizon focuses on shareholder returns rather than serving the population.

The story of the various Blues is an interesting one. Congress repealed federal tax exemption for the Blues when it passed Section 501(m) as part of the Tax Reform Act of 1986. At the time, many wondered whether the Blues would then wholesale convert to for-profit status, but that did not happen immediately. Over time, however, several of the Blues have converted, and at least one study of the conversions has found that consumers have not been adversely affected by the conversion. See The Impact of Blue Cross Conversions on Accessibility, Affordability, and The Public Interest, 81 Milbank Q. 509-42 (2003), by Mark A. Hall and Christopher J. Conover.


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