Maryland's insurance commissioner has denied Blue Cross and Blue Shield of Maryland's plan to restructure its managed-care business into a for-profit public company.
The commissioner declared late last month that the plan doesn't follow state procedure for converting to for-profit status. The Blues said it does not want to follow the procedure.
Blue Cross/Blue Shield
"We do not plan to seek permission to convert the Blue Cross plan in toto," said John Picciotto, senior vice president and general counsel of Blue Cross and Blue Shield of Maryland.
Taking the entire Blues public would make it more vulnerable to takeover, he said.
The Blues wanted to create a for-profit holding company that would own all of its managed-care business. The company would have sold up to a 30% interest of the managed-care business in a stock offering, hoping to raise about $50 million in capital.
The insurer would have retained its indemnity health insurance operations, including all PPO-like products, as a not-for-profit business, Picciotto said.
Insurance Commissioner Dwight K. Bartlett III agreed to arrange a meeting of himself, the governor and the Blues' CEO to discuss other options, Picciotto said.
The insurer also will meet with the commissioner "to discuss any changes we can make to the proposal that would meet his standards," he said. A third option would be to appeal in court.
Bartlett said in his Jan. 20 order that the Blues' proposal "is riddled with conflicts of interest between the dominant for-profit subsidiary and the soon-to-be secondary non-profit parent." Among the conflicts, he said, is the fact that the boards of the parent, the subsidiary and a charitable foundation would be the same.
Picciotto said the Maryland plan is different from the restructuring of Blue Cross of California, which spun off for-profit WellPoint Health Networks in 1993. That left the parent company as a "shell" and precipitated still-unresolved disputes with regulators, he said.
Maryland's plan would retain the parent Blue Cross and Blue Shield as a billion-dollar not-for-profit company, he said.