Blue Cross and Blue Shield of Missouri has reached a settlement with state officials that should conclude three years of hostilities that threatened its existence.
The deal will create the largest healthcare conversion foundation in the state, worth roughly $150 million. Under the agreement reached Sept. 20, 15 million shares of RightChoice Managed Care, the Blues' for-profit managed-care subsidiary, will be transferred to the new Missouri Foundation for Health.
Those 15 million shares represent 80% of RightChoice shares; the remaining 20% are publicly held.
The foundation's mission will be to fill gaps left in healthcare services to the poor or underserved. It will sell RightChoice shares over the next five years until it carries no more than 5% of the company.
The foundation's RightChoice shares will be subject to a voting trust during the ongoing sale to ensure that the foundation has no influence over the operations of New RightChoice, according to the agreement.
New RightChoice will be formed when the Blues becomes a for-profit company, reincorporates in Delaware and merges with RightChoice. New RightChoice will hold the rights to Blue Cross and Blue Shield trademarks in Missouri.
RightChoice was created in 1994 as part of a reorganization by the Missouri Blues, a not-for-profit company. To gain access to capital markets, the Blues put its managed-care business in RightChoice, a for-profit subsidiary. The Blues subsequently sold 20% of RightChoice in an initial public offering, listed the stock on the New York Stock Exchange and retained the rest.
But Missouri Director of Insurance Jay Angoff concluded that the Blues had effectively sold approximately 80% of its business. Both Angoff and Missouri Attorney General Jay Nixon believed the public should receive the charitable benefit of the conversion.
The protracted disagreement resulted in lawsuits and countersuits, all of which should be settled by this agreement. A state judge must still approve the settlement, as must RightChoice shareholders, the Securities and Exchange Commission and the Internal Revenue Service.