North Carolina’s dominant health insurance provider could transfer billions to a holding company instead of returning portions of that surplus to policyholders, under legislation advanced Tuesday in State House.
The House Health Committee passed a bill with broad bipartisan support that would restructure Blue Cross and Blue Shield of North Carolina, the largest nonprofit provider in all 100 counties, and allow it to operate more similar to its national competitors for revenue. The House Insurance Committee will debate the bill on Wednesday.
Although supporters argued it would eliminate a competitive disadvantage, state Insurance Commissioner Mike Causey slammed the bill as an attempt to undermine his regulatory authority and defraud more than 4 million North Carolinians to the money guaranteed to them under state law.
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“It’s not Blue Cross money — it’s the people’s money,” he told lawmakers before the vote, urging them to protect his ability to hold insurers accountable to their consumers.
Causey, a Republican, told reporters Monday that he views the bill as an attempt by Blue Cross to circumvent a state law that limits its reserves and would eventually require the company to return some of that money to policyholders or lower its rates.
The bill would allow Blue Cross and the state’s only hospital services company, Delta Dental, to essentially create a shell company with the same executive leadership that would have more flexibility to move and use money.
The state Department of Insurance would have less oversight of the parent company, Causey said, which could allow Blue Cross to “store” its nearly $4.6 billion in reserves. Both companies will remain fully taxable nonprofits.
North Carolina Insurance Commissioner Mike Causey speaks to reporters about a bill that would allow Blue Cross Blue Shield to reorganize on April 24, 2023, in Raleigh, North Carolina. (AP Photo/Hannah Schoenbaum)
The agency would be required under the bill to review and approve the restructuring to ensure it complies with state law. Causey will have the authority to ensure the company focuses its investments on the health needs of North Carolinians.
Blue Cross and Blue Shield of North Carolina criticized Causey on Tuesday for his “mischaracterizations” of the law, arguing that the bill would allow it to improve efficiency and make investments that better meet the needs of customers and communities. The company said it would buy other insurers to expand its services but did not say which ones it would buy.
“Blue Cross NC members deserve more than the bureaucracy and burdensome regulations that make health care more expensive,” the company said in a statement.
Founded in the 1930s, the nonprofit was able to accumulate assets tax-free until a federal law ended its decades-long tax exemption in 1986. While continuing to maintain its nonprofit status, the company is subject to more more regulation than for-profit companies operating in the state. It is currently required to hold more reserves than its competitors, which would not change under the bill.
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The holding company is required to file annual financial statements with Causey’s office.
Blue Cross already has “tremendous business flexibility” and “dominates” the health insurance market with the largest market share of any insurer in the state, argued Rep. Donna White, a Johnston County Republican. He raised concerns Monday that the bill could stifle competition.
“What we want to make sure is that the citizens of North Carolina who rely on this company … have access, affordability and know that they have health coverage that will take care of them when they need it,” White said. “And they don’t have to sue to get it.”
The state treasurer announced in January that Blue Cross will no longer be the health insurance plan administrator for more than 740,000 state government employees, teachers and their families, starting in 2025. Aetna pushed after administering the plan for more than 40 years, Blue Cross has pointed to the for-profit national insurance giant as the type of company it must modernize to compete.
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Rep. said. John Bradford, a Mecklenburg County Republican and a key sponsor, said the proposal “levels the playing field” and serves as an economic development tool for Blue Cross to grow so it can create more jobs in the state.
Existing laws, he said, put Blue Cross and Delta Dental in a position where they have to ask the Department of Insurance and sometimes the attorney general’s office for “permission to use their own money.”
“If they want to make an investment, they have to get approval, compared to their competitors they can do it faster,” Bradford said.
But Causey said the money was not theirs to invest. He asked lawmakers to “kill the bill” or implement his recommendations to better protect consumers — ideas he said have been largely discounted by lawmakers and lobbyists.
“Blue Cross NC should not be investing policyholder money with the discretion of a company that makes a profit with investor money,” Causey said after a news conference Monday. Behind him, a large screen read, “This bill is about corporate greed.”
