Converting to a for-profit company won't be cheap for Blue Cross and Blue Shield of Colorado.
The Colorado insurance commissioner dealt a blow to the Blues last week when he ruled that the 529,400-enrollee plan had to shoulder most of the cost of converting to a for-profit company.
How much the proposed conversion ultimately will cost the Blues isn't known, but the price tag so far is $6 million, said Neil Westergaard, a Blues spokesman.
"We were very disappointed in the ruling," Westergaard said.
The Blues had hoped to share more of the costs with a not-for-profit foundation being funded through proceeds from an initial public offering of stock.
"Because the conversion is a benefit to (the Blues) and the satisfaction of the requirements of the Conversion Statute a necessary cost of achieving the converted status it desires, the majority of the costs of conversion, as well as the IPO process, should be borne by (the Blues)," wrote Insurance Commissioner Jack Ehnes.
The Blues has said it wants to convert to a for-profit company so it can have access to the capital markets to expand its business and be more competitive.
Requiring the Blues to pour money into a foundation is payback for tax breaks the plan received over the years as a not-for-profit company.
Another round of hearings on the proposed conversion is scheduled for this summer so Ehnes can determine the company's worth.
The proposed conversion still needs final state approval, and the IPO isn't expected until early next year.
Under Ehnes' ruling, the foundation will still be responsible for some costs, including those incurred in its formation, such as attorneys fees to prepare bylaws and articles of incorporation.
The ruling was hailed as good news by a Denver attorney who challenged the Blues' proposal to deduct conversion expenses and other costs from the IPO proceeds.
"We're ecstatic," said attorney Ed Kahn. "We're thrilled for the public." He raised the objection during state hearings held to review the proposed conversion.