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Horizon Blue Cross Blue Shield of New Jersey, the state’s largest health insurer, can restructure in ways the company says will give it flexibility in a rapidly evolving marketplace, but which consumer advocates fear opens the door to its becoming a for-profit giant beholden to shareholders.
Gov. Phil Murphy announced Wednesday afternoon that he had signed legislation allowing the insurer to transition from a not-for-profit organization to a not-for-profit mutual holding company — a distinction that Horizon has said would free it of strict state rules that put it at a competitive disadvantage.
The change would allow Horizon to acquire other providers and pharmacy benefit managers, stabilize premiums and see a lower tax rate that would let it invest more to improve the health of its 3.6 million customers, according to the Newark-based insurer and lawmakers.
There’s also a financial upside for the state: Restructuring the insurer would mean it would pay New Jersey $1.25 billion over 18 years, including $600 million next year.
“Governor Murphy’s signature on this historic law is a victory for New Jerseyans who want more from health care,” said Tom Wilson, a Horizon spokesman.
“Horizon, and our 3.6 million members, appreciate the governor’s support and the significant work his administration did to shape and improve this bill that preserves our not-for-profit mission while giving the company the flexibility to adapt and innovate to enable care that is more connected, more convenient and more affordable,” Wilson said.
What the deal may mean for consumers
Consumer advocates and Republican lawmakers were leery of such positive claims.
They worried that the state, with its massive revenue hole due to the COVID-19 pandemic, would use the insurer as a piggy bank instead of using its annual payments to improve health care, especially in underserved communities.
“There are no restrictions on how the state could spend the initial $600 million payment from Horizon or the smaller payments in future years,” Sen. Anthony Bucco, R-Morris, said last week. “That money will end up going into the state’s general fund, and it will disappear with nothing to show for it.”
Murphy, who is borrowing $4.5 billion to support the state budget, announced his approval of the bill without any statement on it.
Although the bill he signed specifies that Horizon cannot become a for-profit company, it would allow the insurer to create for-profit subsidiaries that are “all more concerned with the bottom line than with benefiting policyholders,” Maura Collinsgru, health care program director of the advocacy group New Jersey Citizen Action, wrote in an op-ed for NJ Advance Media last week.
Horizon was created by the state in 1932 as a nonprofit organization that was an insurer of last resort, covering residents regardless of their health.
The state and the U.S. since then have required all insurers to provide coverage no matter the preexisting conditions. Horizon covers more than 3 million people in the state.
Critics such as Collinsgru worry that a reorganization of the insurer would mean less accountability to New Jersey and its millions of customers. But Horizon has said its members won’t see their plans change, and lawmakers said the insurer will maintain its original mission in New Jersey.
“This is a brilliant way to let Horizon be a part of the cutting-edge health care innovations that will improve the well-being of New Jersey residents while preserving the company’s not-for-profit status,” said one of the sponsors of the bill, Assemblywoman Joann Downey, D-Monmouth.
“By reorganizing in this manner, Horizon would still be the charitable insurer so many families rely on but would also be free to help promote medical advances that everyone can benefit from,” she said.
Horizon’s plan for restructuring would have to be reviewed the Department of Banking and Insurance “to determine if it is financially sound and protects the interests of policyholders,” according to the Senate Democratic Office.
Dustin Racioppi is a reporter in the New Jersey Statehouse. For unlimited access to his work covering New Jersey’s governor and political power structure, please subscribe or activate your digital account today.
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