Blue Cross Withdraws Conversion Plan
Posted July 8, 2003
CHAPEL HILL, N.C. — Blue Cross and Blue Shield of North Carolina, the state's largest health insurer, said it would withdraw its plan to convert from a non-profit to a for-profit company.
"We have now reached a point where it is increasingly clear that the outcome will not protect the interest of our company, our customers or the value of the foundation," said Bob Greczyn, Blue Cross president and chief executive officer. "As such, our board of trustees, of which I am a member, voted unanimously yesterday to withdraw our plan of conversion."
Greczyn cited three reasons for backing out of the conversion process.
First, he said regulators made it clear they would try to impose too many restrictions on Blue Cross that would prevent a level playing field in the market. Second, he said the process has dragged on too long and lastly, he believes the company would be asked to give up too much confidential information that could unfairly benefit competitors.
The move came less than a week after a consultant's report recommended that the state Department of Insurance (DOI) has the authority to oversee and possibly modify increases in cash compensation if Blue Cross converted from a non-profit to a for-profit company.
It also came after insurance regulators determined whether they think Blue Cross should have been allowed to convert. That recommendation was not made public, however.
The attorneys the DOI hired to work on the conversion could have taken two to three more months to draft a decision for Insurance Commissioner Jim Long.
Spokeswoman Chrissy Pearson says it is the DOI's duty to ask tough questions since conversion could impact millions of people.
"We don't apologize for being tough on the company," she said.
A consultant's report warns profit margins could result in more than $500 million in rate hikes over five years, which could leave thousands without insurance and result in five or six avoidable deaths a year.
"That's huge news. It makes this issue suddenly into a life-or-death issue," Pearson said.
Greczyn said the company did not foresee filing another conversion plan or pursuing any legislative avenues to convert to a for-profit company.
"Conversion was never about our success today -- it was about positioning the company for long-term success. As a not-for-profit, we will continue on our current path to remain a strong stable and reliable health insurer for North Carolinians,'' he said.
Rhone Sasser, chairman of the board of trustees, said the company faced regulations "that would improperly encroach upon our board's management responsibilites -- imposition of rate caps, release of our competitive information to our competitors and interference with our ability to attract and retain the best leadership for our company."
The conversion process began nearly two years ago for Blue Cross, which has 2.8 million members. Critics said they were concerned that the conversion would cause insurance premiums to rise, leading to lose their coverage.
Blue Cross's leaders said the conversion would not have caused noticeable changes in how the company did business. They said they needed the change, in part, to free Blue Cross from regulations that don't apply to its competitors.
The plan also would have created an independent foundation that could have pumped millions of dollars into improving health care in North Carolina.