What's Blue Cross and Blue Shield of Colorado worth?
Jack Ehnes, Colorado's insurance commissioner, plans to find out before he decides whether the Blues can convert to a for-profit stock insurance company.
There had been some disagreement between the Blues and state insurance officials about when a fair market value had to be determined according to state law.
The Blues wanted to wait until the conversion's initial public offering, but insurance officials wanted a value placed before the deal got the go-ahead.
Late last month, Ehnes appeared to strike a compromise when he ordered evidentiary hearings on the conversion to be split into two parts.
The first phase, beginning in September, will deal with all other statutory requirements of the conversion except valuation. A second set of hearings following that will tackle the question of what the Blues is worth.
Other public hearings on the conversion begin this month.
Ehnes won't issue a final decision on the conversion until all the hearings are complete.
Putting a price on the Blues is significant because the company will fund a not-for-profit, independent foundation with the net proceeds of the public offering.
"It creates a floor and assures that the value that's obtained in the IPO will be at least the fair market value," said Ed Kahn, a Denver attorney whose firm lobbied for strong state control over conversions.
Pouring money into a foundation is payback for past tax breaks the insurer received as a not-for-profit company.
Kahn said the Blues is playing "a game of legal chicken" because it doesn't want to be the first to come up with a price.
The 60-year-old insurer wants to convert because it needs the money to invest in information systems and growth, said Carl Miller, vice president of government relations for the Denver-based plan.
The group covers 370,000 enrollees in Colorado, plus 48,000 in Nevada because of a merger last year.
According to the latest figures from the Colorado insurance division, the Colorado Blues last year had total assets of $225.5 million and total liabilities of $77.3 million. It posted a $10.6 million profit on $206.7 million in premium income.
Miller said the Blues won't challenge Ehnes order on the valuation.
"This company is worth whatever Wall Street is willing to invest in it," he said.
The earliest the Blues expect a conversion to happen is sometime next year.
And if it doesn't go through, "we'll continue to be what we are," Miller said.
Other Blues plans that have converted include Blue Cross of California, Woodland Hills; Blue Cross and Blue Shield of Georgia, Atlanta; and Trigon Blue Cross Blue Shield, Richmond, Va., according to the Chicago-based Blue Cross and Blue Shield Association.