Blue Cross and Blue Shield of Colorado will file plans to become a for-profit company in Colorado in the fall and could complete the conversion in early 1997.
Its decision follows the passage of state legislation creating a procedure for conversions of not-for-profit hospitals and health service corporations into stock insurance companies (See related stories, p. 16 and p. 28). The law was signed June 6 by Gov. Roy Romer.
With more access to capital, the Colorado Blues then will seek to expand regionally through mergers or affiliations with other Blues plans, said Carl Miller, its spokesman.
A subsidiary already manages the Nevada and New Mexico Blues plans.
"What we've never been able to accomplish is a full-scale merger; someday, perhaps we will," Miller said. "Our goal is to be the headquarters for a Rocky Mountain regional Blue Cross and Blue Shield."
The Denver-based Colorado Blues covers 340,000 people under its health plans. It earned net income of $9 million on revenues of $423 million in 1995, and its current surplus is estimated at about $165 million.
Executives sought legislation to allow its conversion to a for-profit company, arguing that as a not-for-profit it couldn't raise sufficient capital to compete (Feb. 26, p. 56).
The new law requires the Blues, and other converting companies, to file a conversion plan with the Colorado Division of Insurance. The Blues' fair market value will be determined by the insurance commissioner and awarded to a new, independent foundation dedicated to promoting the health of Colorado citizens.
Several modifications were made to the legislation in response to criticism from the Colorado Lawyers Committee, a volunteer legal organization that watches public issues. For example, the legislation originally called for "adequate value" instead of "fair market value," said attorney Ed Kahn, who is acting for the committee. The law also now limits the political activities of the new foundation, Kahn said.
The group's main concern is to ensure the not-for-profit assets are used for the good of the public, he said. "It's our intention to remain a watchdog for the public interest," Kahn said.
The law also includes a provision barring ownership of more than 10% of the new Blues by any organization other than the foundation or the new corporation for three years after its conversion. Blues executives wanted the provision to give the company a chance to build without facing hostile takeovers and to comply with Blues licensing requirements, Miller said.