The state of North Carolina will ask a judge to declare more than half a billion dollars in reserves held by Blue Cross and Blue Shield of North Carolina to be a public asset, state Attorney General Mike Easley announced last week.
"The citizens of this state have accorded substantial benefits to Blue Cross and they, justifiably, expect that the organization's substantial resources will continue to be used on their behalf," Easley said.
Hampton Dellinger of the attorney general's office said the state soon would file a motion asking to intervene in a lawsuit filed in Orange County, N.C., by a Blues subscriber.
Roland Giduz of Chapel Hill filed a class-action lawsuit earlier this month contending the $532 million in reserves held by the Blues belongs exclusively to the company's 1.6 million subscribers. He also contends the company is holding $200 million more than is required by state law and that money should be distributed immediately to the subscribers.
Easley said his office will ask to intervene in that lawsuit on behalf of the public.
"Our goal will be to have the court declare that the assets at issue in the case belong, first and foremost, to the public," Easley said.
Lynn Garrison, a Blues spokeswoman, said the company welcomed Easley's involvement, even if it disagrees with his position on the reserves.
"We think it's positive that Mike Easley has decided to get involved in the lawsuit," she said. "We continue to believe that the case is totally without merit. Our reserves are calculated properly based on state law. We also believe that the policyholders own the company and that the reserves belong to them."
Easley said his office also is negotiating with state legislators to keep clear legal authority to go to court on behalf of the public.
Lawmakers have been arguing for weeks over guidelines the Blues would have to follow if it converts to a for-profit from a not-for-profit organization.
Garrison said the Senate proposal would allow the attorney general to be involved, "and we want to ensure the attorney general's heavy involvement if the company should decide in the future to convert."
Consumer advocates and some lawmakers have argued that the $532 million in reserves, and even the company's fair market value, should be placed in a charitable trust if the Blues becomes a for-profit company.
They argue the company has built up its reserves as a result of tax breaks it has enjoyed during its 65-year history.
The insurer paid no property taxes until 1973 and since the early 1940s has enjoyed a lower tax rate on its revenues from insurance premiums than its competitors. It also was exempt from federal income taxes until 1987.
The state House and Senate have been negotiating over House amendments that would allow the insurance commissioner to approve any conversion and to transfer reserves to a charitable foundation.