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Blue Cross Withdraws Conversion Plan

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CHAPEL HILL, N.C. — Blue Cross and Blue Shield of NorthCarolina, the state's largest health insurer, said it wouldwithdraw its plan to convert from a non-profit to a for-profitcompany.

"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 andchief 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 reportrecommended that the state Department of Insurance (DOI) has the authorityto oversee and possibly modify increases in cash compensation ifBlue Cross converted from a non-profit to a for-profit company.

It also came after insurance regulators determined whether theythink Blue Cross should have been allowed to convert. Thatrecommendation was not made public, however.

The attorneys the DOI hired to work on the conversion could havetaken two to three more months to draft a decision for InsuranceCommissioner 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 anotherconversion plan or pursuing any legislative avenues to convert to afor-profit company.

"Conversion was never about our success today -- it was aboutpositioning the company for long-term success. As a not-for-profit, we will continue on our current path to remain a strong stable andreliable health insurer for North Carolinians,'' he said.

Rhone Sasser, chairman of the board of trustees, said thecompany faced regulations "that would improperly encroach upon ourboard's management responsibilites -- imposition of rate caps,release of our competitive information to our competitors andinterference with our ability to attract and retain the bestleadership for our company."

The conversion process began nearly two years ago for BlueCross, which has 2.8 million members. Critics said they wereconcerned that the conversion would cause insurance premiums torise, leading to lose their coverage.

Blue Cross's leaders said the conversion would not have causednoticeable changes in how the company did business. They said theyneeded the change, in part, to free Blue Cross from regulationsthat don't apply to its competitors.

The plan also would have created an independent foundation thatcould have pumped millions of dollars into improving health care inNorth Carolina.


Cullen Browder, Reporter
Gil Hollingsworth, Photographer
Kamal Wallace, Web Editor

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