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Blue Cross: Example to Nation

by Shannon E. St. John


Finally—a good thing for the people of North Carolina and for progressive causes. Thanks to citizen and activist participation, the Blue Cross Study Commission has recommended a bill that would create a charitable trust with 100% of the value of Blue Cross if it converts to for-profit status.

This piece, by the Executive Director of the Triangle Community Foundation and Co-Chair of the Coalition for the Public Trust, describes how involvement helped steer the legislature away from turning Blue Cross into a profit mill for its directors and toward the charitable purposes for which it was created—health care for all North Carolinians.

On May 1st, after 6 meetings and months of work, the Blue Cross Conversion Legislative Study Commission voted to recommend a bill outlining the process by which Blue Cross and Blue Shield of North Carolina may convert from nonprofit to for-profit status. This draft legislation was presented to the members of the House and Senate Conference Committee who worked last summer on a compromise on the original conversion bill, Senate Bill 993. The conferees met on May13th and voted to send the bill on to the General Assembly in a conference committee report.

The Coalition for the Public Trust, made up of over 400 individuals and 110 organizations representing over 85,000 people, rallied around this issue during last summer's legislative session and has been actively involved in the process resulting in this bill. The Coalition was formed to advocate for the public interest and nonprofit integrity as the legislature considered a roadmap for conversion by Blue Cross.

The Coalition strongly supports the study commission's bill. The bill requires that 100% of the fair market value of the company, in the form of 100% of the stock in the new for-profit company, be transferred to a new charitable foundation. Additionally, Blue Cross cannot become a mutual company or merge with another company unless it converts to for-profit status first and sets aside 100% of its value for the charitable foundation.

Perhaps the most significant part of the bill for the people of North Carolina is the foundation that will be created upon conversion. The bill outlines excellent provisions for the new foundation including a broad health mission "to promote the health of the people of North Carolina." The board will be independent and selected through an open process, with no political or Blue Cross appointees. Opportunities for broad public input into the selection of the Board as well as the ongoing operations of the foundation are also written into the bill. The foundation will have clear payout requirements ensuring that the money gets to the organizations that will use it to promote health. Finally, there are prohibitions against self-dealing, private gain, and political activity. These provisions ensure that the foundation will be able to operate for the broader good of the people of this state, remaining true to its charitable obligation.

There is one provision in the bill that is of concern to the Coalition for the Public Trust. The provision that defines a "conversion" allows Blue Cross to stay nonprofit while purchasing without limit other for-profit health insurance companies in North Carolina. Under this provision, Blue Cross can put the public's assets at a higher level of risk than the Coalition feels is appropriate for a nonprofit. The provision also allows Blue Cross to buy up its competitors, since there is no limit on the size or number of competitor acquisitions it can undertake. The Coalition agrees with the Department of Insurance's assessment that this ability serves no public purpose.

Despite these drawbacks, there is a gate through which Blue Cross must pass in its attempt to acquire other NC companies. Potential acquisitions must be reviewed by the Department of Insurance, which will provide careful administrative and public review. The Coalition is confident that the Department of Insurance will have the best interest of consumers in mind when considering acquisitions.

Because of the open and inclusive study commission process that resulted in this legislation, the Coalition for the Public Trust feels that the public interest was protected. Many opportunities for public input and advocates were included in the negotiating process. Although the public will need to remain vigilant and watch over future Blue Cross acquisitions, the bill drafted by the study commission is the best legislation of its kind in the country to date.

North Carolina has achieved something that many states could not, public participation in the debate about the future of one of the state's largest health insurers. The process has been a triumph for the public interest and has resulted in good legislation that will truly benefit the people of North Carolina.

  Shannon E. St. John is Executive Director of the Triangle Community Foundation and Co-Chair of the Coalition for the Public Trust.  

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