NC Insurance Commissioner pans Blue Cross restructuring proposal. The main sponsor says he’s working on changes.

The lead House sponsor of a bill that would exempt Blue Cross Blue Shield NC from some insurance regulations told a House committee the company needed the changes to compete with for-profit companies, even as state Insurance Commissioner Michael Causey continued to denounce the proposal.

Rep. John Bradford, a Mecklenburg County Republican, said he is working on a revised version of the bill that would address Causey’s concerns. 

Blue Cross is the state’s dominant health insurance company. The non-profit wants to create a holding company for itself into which it could transfer assets, property, liabilities, and ownership interests in subsidiaries. The new holding company would be exempt from some insurance laws. Bradford said the changes would make Blue Cross more nimble. 

“Health care has changed, health care is changing,” he said. “Under today’s corporate structure, they can’t move fast. In the world of business, you have to be able to move fast when it comes to opportunities.”

The House Health Committee discussed the bill Tuesday, but did not vote on it. 

Though no votes have been taken on House bill 346, nearly half of the members of the state House have signed on as sponsors or cosponsors. Thirty of 50 state senators have signed on to the Senate version. 

Causey told the House committee that the bill was not acceptable and noted that, even with competition, Blue Cross NC dominates the state’s health insurance market. 

Blue Cross NC has 82.8% of the individual health insurance plan market, 79.6% of the group comprehensive insurance market, and 86.8% of the Medicare supplemental insurance market, Causey said.

“I know a lot of you have signed on to this bill and think it’s the greatest thing since sliced bread. But I’m here to tell you that this is not a good bill in its current form and it’s my job to protect the consumers.”

Blue Cross isn’t like a for-profit company that’s investing with stockholder money, he said, because Blue Cross is seeking to invest using North Carolina policyholders’ money.

Blue Cross says it needs the changes because existing law limits how it can invest in other companies, Causey said. 

Causey said that since he’s been in office, the state insurance department has had a good working relationship with the company. When Blue Cross asked for something, the department “bent over backwards to get them what they needed.”

Blue Cross NC recently lost a lucrative contract to administer the State Employee Health Plan to Aetna. The company is suing to try to get the job back. 

Darcie Dearth, a Blue Cross spokeswoman, said after the committee meeting that the company’s restructuring request has nothing to do with losing that third-party administrator contract. 

Critics have said that the restructuring would allow Blue Cross to skirt a 1998 law that says if the company ever converted to a for-profit, it would transfer 100% of its fair market value to a foundation created to “promote the health of the people of North Carolina.” A section of the bill says that the holding company would not be subject to the part of the 25-year-old law that would establish the foundation.

Dearth said Blue Cross does not intend to become a for-profit company. The bill includes guardrails that specify that if it does, the foundation would be funded using the fair market value of the nonprofit holding corporation.

“It’s an important backstop that accounts for value of the entire system, not just the insurance company,” she said in an email.