BCBSNC bill clears another hurdle in the Senate

A bipartisan bill that would allow Blue Cross Blue Shield North Carolina and Delta Dental to reorganize and create a holding company that could transfer billions in surplus policyholder money passed in the Senate Commerce and Insurance Committee Wednesday.

Rep. John Bradford, R-Mecklenburg, one of the sponsors of H.B. 346, Reorganization & Economic Development Act, said it works to level the playing field for Delta Dental and BCBSNC, two hospital service corporations. He said the not-for-profit entities currently under state law don’t have the same flexibility as other companies.

“Healthcare is a very competitive space that’s changing quickly, and this bill really just attempts to give them a chance to be able to make investments and create jobs here in North Carolina while continuing to improve care,” he said.

Portions of the debate can be viewed below.

The bill passed 86-26 in the House last month.

The committee discussion focused mainly on BCBSNC. Bradford assured colleagues that nothing about BCBSNC as an insurance company would change, including oversight over healthcare premiums, and that final approval remains with Commissioner of Insurance Mike Causey, who opposes the bill.

Sen. Natasha Marcus, D-Mecklenburg, said she was disappointed there weren’t amendments to the bill and that she understood that BCBSNC first-quarter earnings were “really, really good” and didn’t think they needed this bill to keep operating the way they have been operating. 

“This bill, as I understand it, does change the reserves that the company is currently required to keep, and the investment income they get from that will then be taken out into the separate corporation, so I do think this will be bad for policyholders,” she said. “Would you agree that it is a lot less likely that there will be repayments to policyholders as it currently happens and is provided in law because there won’t be the profits there without that $5 billion of money held in as it is now?”

Bradford told Marcus they went “90% to the line” of trying to listen to all of the objections, and they made a lot of changes, but both companies cannot move quickly enough to make an investment decision because they have to keep going back and getting approvals and this bill would streamline that. 

Marcus said she didn’t get an answer to the question about whether the bill would make it less likely that policyholders would be given premium rebates.

“In terms of rebates this bill does not impact rebates,” Bradford replied. “This bill does not impact premium rates, no matter how many times you want to say that it doesn’t make it true. The reality is those things are still under the Department of Insurance and their oversight.”

Peg O’Connell, a volunteer with the Coalition for Public Trust, said they oppose the bill for three reasons.

The first is that the bill doesn’t explicitly address what would happen in the event of a change of control at the holding company level. She said it states that no action by the holding company would lead to the conversion. It is essential that the transaction at the holding company level be subject to the public conversion trust statute so if there’s a change of control at the holding company level, the public does not lose its benefit in BCBSNC.

“The second reason, there is no requirement, and this is a big concern to us, that the holding company’s mission aligned with that of the insurance company to benefit the people of North Carolina,” O’Connell said. “Finally, there are no limits on the amount of dividends that can be sent up to the holding company after this initial transaction is formed and the holding company is formed.”

“The bill does what it says it does it is enabling legislation that would allow us to reorganize and modernize our structure and give us the best chance to remain a mission-driven North Carolina not-for-profit,” said Chris Evans, vice-president of public affairs for BCBSNC. “It is in direct support of our goals for affordability and access which are at the center of everything we do. Any claims to the contrary are just patently false.” 

Evans said the bill would give them the same structure that other companies in the state have, like North Carolina Farm Bureau. “The Department of Insurance retains all oversight of Blue Cross as an insurance company, as well as the oversight the legislature already has in place for insurance holding companies that include oversight of premiums, reserves solvency, and consumer and provider protections,” she said. “The bill ensures transparency by requiring reporting by the company about the types of investments we make and the salaries of our executives, and it puts guardrails in place for consumer protections.” 

Sara Lang, spokesperson for BCBSNC, emailed a statement to Carolina Journal stating, “Blue Cross NC thanks Senate members and legislative leaders for their support to advance solutions that help improve health care access and make care more affordable for all North Carolinians.”

Causey said he has been all over the state, and the people he talked to “don’t like the bill.” He also said the Department of Insurance would have no say over how much policyholder money would be taken out of the insurance company and put into the holding company. He also compared the bank failures in the U.S. this year and BCBSNC.

“If you look at what’s happened this year, we’ve had three major bank failures, the second and third largest bank failures in United States history, and those banks fail not because of criminal activity but because of poor oversight or no oversight,” he said. “Lack of regulatory controls. So that’s what Blue Cross is asking to do.”

Sen. Jim Perry, R-Lenoir, admonished Causey on several things he has said regarding the bill.

“This is not policyholder money,” he said. “That is a mischaracterization. Insurance companies have a mandate to pay out a certain percentage of every dollar in claims, but they have to do that, so anything left over does not belong to a policyholder.”

Perry also referenced a press release Causey sent out about how other states had converted, which he said is scary for those who don’t understand it, but that isn’t what this legislation is about.  

“That type of hyperbole is not helpful in these situations,” he said. “I don’t doubt that he has been all over the state and heard a lot of feedback because he’s been whipping them up in a frenzy. Calling folks around the state, putting out information like that instead of being here with us trying to work on this to find a solution.”

Perry said he understands why BCBSNC has to reinvent itself as a company after suffering some losses due to competition and is concerned about the 5,000 people they employ.

“I don’t want them to fail,” he said. “I want them to be able to be competitive.”

The bill passed the committee and now heads to the Senate Health Committee.

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