Blue Cross and Blue Shield of Missouri has agreed to place all publicly traded shares of its for-profit subsidiary in a foundation geared toward promoting public health.
The agreement will resolve a nearly 2-year-old court battle between the state and the Blues over the tax-exempt Blues' obligations to the public. The settlement is at least a tacit acknowledgement by the insurer that it is a public charity.
An independent, state-approved board of directors will oversee the foundation. Blue Cross will contribute its 15 million shares of stock in RightChoice Managed Care-worth about $150 million-to the foundation, which will fund its activities by selling the stock.
RightChoice will become the direct licensee for the Blue Cross and Blue Shield names and trademarks and will retain voting rights to the foundation's shares until they are sold.
The Blues created RightChoice, a for-profit subsidiary, in 1994. The Blues retained 80% of the RightChoice stock and sold the remainder on the New York Stock Exchange. Subsequently, it moved most of its managed-care business to the subsidiary. That irked the state Department of Insurance, which began negotiating with the Blues to contribute the value of the stock to a charitable foundation.
In May 1996, the Blues sued the state to stop regulators from taking action against the company (May 20, 1996, p. 20). The Blues lost its court battle with the state attorney general and insurance director more than a year ago.
An appeal of that ruling has been suspended while state and Blues officials work out the agreement, which is subject to shareholder approval.