The 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 of policyholders’ excess cash was approved Wednesday by the Senate Commerce and Insurance Committee.

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

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

Parts of the debate can be viewed below.

HB 346, Reorganization & Economic Development Act debated May 24, 2023

The bill passed in the House last month by 86 to 26 votes.

Discussion in committee focused primarily on the BCBSNC. Bradford assured colleagues that nothing about BCBSNC as an insurance company will change, including oversight of health care premiums, and that final approval rests with insurance commissioner Mike Causey, who opposes the bill.

Senator Natasha Marcus, D-Mecklenburg, said she was disappointed that there were no amendments to the bill and that she understood BCBSNC’s first quarter earnings were really, really good and she didn’t think she needed to. bill to continue operating the way they have operated. .

This bill, as I understand it, changes the reserves that the company is currently required to maintain, and the resulting investment income will then go to the separate company, so I think this will be bad for the policyholders, she said. . Would you agree that it’s much less likely that there will be refunds to policyholders as is currently the case and is required by law because there will be no profits there without those $5 billion of money being held as they are now?

Bradford told Marcus that they’ve gone 90% trying to listen to all objections and have made a lot of changes, but both companies can’t move fast enough to make an investment decision because they have to keep going back and getting approvals and that bill would simplify that.

Marcus said he hadn’t gotten an answer to whether the bill would make policyholders less likely to be given premium discounts.

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

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

The first is that the bill does not explicitly address what would happen in the event of a change of control at the holding company level. He said he claims no action by the holding company would lead to the conversion. It is essential that the holding-level transaction be subject to the public conversion trust statute, so if there is a change of control at the holding-level, the public does not lose its edge in BCBSNC.

The second reason, there is no requirement, and this is a major concern for us, that the mission of the holding company aligns with that of the insurance company to benefit the people of North Carolina, OConnell said. Finally, there are no limits to the amount of dividends that can be paid to the holding company after this initial transaction is formed and the holding company is established.

The bill does what it says it will, which is allow for legislation that would allow us to retool and modernize our facility and give us the best shot at remaining a mission-driven North Carolina nonprofit, said Chris Evans , vice president of public affairs for BCBSNC. It is in direct support of our accessibility and access goals that are at the heart of everything we do. Any claim to the contrary is demonstrably false.

Evans said the bill would give them the same structure that other companies in the state, such as the North Carolina Farm Bureau, have. The Department of Insurance maintains all oversight of Blue Cross as an insurance company, as well as the oversight that the legislature already has in place for insurance holding companies which includes oversight of premiums, reserve solvency and consumer protections and of suppliers, he said. The bill provides transparency by requiring the company to report on the types of investments we make and the salaries of our executives, and puts in place barriers to protect consumers.

Sara Lang, spokeswoman for BCBSNC, sent a statement to the Carolina Journal saying, “Blue Cross NC thanks members of the Senate and legislative leaders for their support of advanced solutions that help improve access to health care and make the more accessible care to all of North Carolina.

Causey said he’s been all over the state and the people he’s talked to don’t like the bill. She also said the Department of Insurance would have no say in how much policyholder money would be taken from the insurance company and put into the holding company. She also compared bank failures in the US 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 US history, and those banks fail not because of criminal activity but because of little or no oversight. he said. . Lack of regulatory controls. So this is what Blue Cross is asking you to do.

Senator Jim Perry, R-Lenoir, cautioned Causey about several things he said about the bill.

This is not policyholders’ money, he said. This is a mischaracterization. Insurance companies are mandated to pay a certain percentage of every dollar in claims, but they have to, so anything left over doesn’t belong to a policyholder.

Perry also referred to a press release Causey sent out about how other states had converted, which he said is scary to those who don’t get it, but that’s not what this legislation is about.

That kind of hyperbole isn’t helpful in these situations, he said. I don’t doubt he’s been all over the state and heard a lot of feedback because he’s been whipping it up frantically. Calling people all over the state, spreading information like that instead of being here with us trying to work through this to find a solution.

Perry said he understands why BCBSNC needs to reinvent itself as a company after suffering some competitive losses 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 is now going to the Senate Health Committee.

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