Two Blue Cross and Blue Shield plans in Missouri are sparring with state regulators over their public benefit obligations in converting to for-profit status.
The dispute has placed one of them-Blue Cross and Blue Shield of Kansas City-in "limbo," said Leigh Elmore, a spokesman for the plan. It has been unable to create a for-profit managed-care subsidiary while regulators negotiate with the other plan, Blue Cross and Blue Shield of Missouri, over its public benefit obligation, he said.
In search of capital to better compete, Blue Cross and Blue Shield of Missouri in 1994 created a publicly traded, for-profit subsidiary, Right-Choice Managed Care. According to Jay Angoff, state insurance commissioner, the Blues then "transferred substantially all of their business into their for-profit subsidiary," triggering a public benefit obligation.
Angoff said a "neutral" third party should now determine how much the plan owes to satisfy that obligation.
But the plan said in a written statement that "two of the country's leading law firms" concluded that it "incurred no public benefit obligation as a result of the transactions."
A Blue Cross and Blue Shield of Missouri spokeswoman told MODERN HEALTHCARE*that the department "tried to apply California law" to the plan's spinoff of RightChoice. "But clearly we are not a public benefit, but a mutual benefit insurance company," whose assets belong to members who have paid premiums, he said.
Following California law, several of that state's HMOs contributed their assets to charitable foundations when they converted to for-profit status. Most recently, Blue Cross of California said it would set up two foundations worth $3 billion. But it originally denied it owed anything, calling its conversion a "restructuring."
"Consumer groups are very eager to tout the California experience and present it as the model of the way things should go in the rest of the country," Elmore said. "Regulators are mentioning our entire asset base of $320 million" as what the plan would owe in converting, he said.
The plan is willing to set aside $35 million over a 25-year period to fund community health programs, he said.
Because Missouri law is not clear about for-profit conversions, the plan is supporting a bill outlining a contribution formula for conversions. The state Senate is now debating the bill, which has no House version, he said.
If the bill doesn't pass and the insurance department doesn't negotiate with the Kansas City Blues plan, it "may be forced to seek other alternatives through mergers," Elmore said.
Although both Missouri Blues plans have been "almost bitter enemies over the years, we just made up and are trying to cooperate. So a (merger) is not outside the realm of possibility," he said.