Horizon Blue Cross Blue Shield of New Jersey, the largest health insurer in the state, cleared the latest hurdle in its plan to expand into the health care business late last week when the state Department of Banking and Insurance gave preliminary approval to change its corporate charter.
Banking and Insurance Commissioner Marlene Caride issued a statement late Thursday announcing Horizon’s application to become a nonprofit mutual holding company is “complete.”
The state’s vetting process is far from done, however. Caride said her office is performing a health impact study to decide whether Horizon changing its corporate charter is in the best interest of its 3.6 million policyholders. A state spokeswoman on Friday did not know when that study would be available to the public.
One-third of Horizon’s customers are on Medicaid, the state and federally funded insurance program for low-income and disabled people. Horizon was created as a not-for-profit health services corporation that at one time was considered the insurer of last resort for people with no other means to receive coverage.
Gov. Phil Murphy signed a law in December 2020 that established a path for Horizon to change its governing structure and allow the $13 billion not-for profit to act more like its for-profit competitors by spinning off for-profit subsidiaries and invest money in new technology to track members health, or buy a chain of physicians practices, among other options.
In exchange for the state allowing Horizon to reorganize, the company has committed to paying the state $1.25 billion over 25 years to soften the blow of losing other tax revenue the Newark-based company has provided.
The law requires Caride’s office to approve the transformation unless she determines the plan “is contrary to law; would be detrimental to the safety or soundness of the proposed reorganized insurer and insurance company subsidiaries of the proposed mutual holding company; or does not benefit the interests of the policyholders of the health service corporation or treats them inequitably.”
The law also requires the state to host three public hearings, all of which are scheduled for October. The first hearing is the only in-person session, scheduled for Oct. 6 at 11 AM at the state Department of Banking and Insurance’s office, 20 West State Street, Trenton. The virtual hearings will be held Oct. 11 at 6:00 PM and Oct. 17 at 1:00 PM, Caride’s announcement said.
In a letter to Horizon President and CEO Gary St. Hilaire, Caride asked a number of questions about the company’s future. The application says the change in corporate structure will give the company the “flexibility to make strategic investments that can begin to cover some of our members’ health care costs, which are currently covered solely by member premiums.” Caride asked how the company will keep premiums affordable “given the recent trend in medical inflation.”
She asked how will the company improve health care equity and “culturally competent care” for people of different races and ethnic backgrounds, a priority for the Murphy administration. Horizon intends to transfer $300 million from its regulated insurance business into Horizon Mutual Holdings, the new parent company and Caride asked how that money would be spent.
Horizon spokesman Tom Wilson declined to address Caride’s questions prior to the hearing.
“For almost ninety years, Horizon’s members have relied on us to help them achieve their best health, to work with their doctors to improve quality, and to make care more affordable and convenient. What our members need and demand from health care today is rapidly changing and becoming a not-for-profit mutual will better position Horizon to continue meeting their needs,” Wilson said in a statement.
“We remain committed to continue working with the Department to achieve a successful completion of this process and to providing the benefits that the reorganization will deliver to our members,” Wilson’s statement said.
Under the law, Horizon will remain “a charitable and benevolent institution,” and would not be able to convert to a full for-profit company or be acquired by one unless the company made an application to the state to do so. This language was added to assure consumer advocates that Horizon is not ducking its responsibilities to its members.
Maura Collinsgru of New Jersey Citizen Action, one of the consumer organizations that opposes Horizon’s plans, said she was disappointed the health impact study may not be ready in time for the hearings. It’s a document that could shed light on what is a very complicated process. Likewise, there is no detail on the subsidiary companies Horizon intends to create
“There is no meaningful information here we could evaluate,” Collinsgru said. “Some of the questions the commissioner raised are good, but I would venture to say there are more to be asked.”
Collinsgru also noted that the law allowed the public hearings to be scheduled over 90 days. The pace seems “rushed,” she said.
Horizon’s application may be found here.
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Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on Twitter @SusanKLivio.
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