Local and national consumer groups are keeping a close eye on the proposed for-profit conversion by Blue Cross and Blue Shield United of Wisconsin.
The groups, including Yonkers, N.Y.-based Consumers Union, have written to Wisconsin state officials urging strict scrutiny of the proposed deal.
"Without a process to ensure that the people of Wisconsin receive the full fair market value for their nonprofit insurance plan, millions of dollars could be lost," the groups wrote in a letter to state officials, including the governor, attorney general and insurance commissioner.
The Milwaukee-based Blues, which covers 700,000 Wisconsin residents, announced this month that it plans to convert to a for-profit, stockholder-owned company. The Blues, although not-for-profit, is not tax-exempt (June 7, p. 4). It pays federal and state income taxes.
The Blues' proposed conversion includes turning over the proceeds of a stock sale, expected to be about $250 million, to a new not-for-profit foundation the insurer is creating. The money would then be split between the Medical College of Wisconsin, in Milwaukee, and the University of Wisconsin to develop public health initiatives.
Consumer groups are asking for an independent valuation of the Blues' assets.
In a June 3 press release announcing the proposed conversion, the Blues referred to proceeds from the conversion as "money donated by Blue Cross."
But consumer groups have taken issue with that. "(The Blues) is not making a 'donation' or 'gift' of the approximately $250 million; it is fulfilling an obligation it has to the people of Wisconsin," they said in their June 9 letter.
The proposed conversion is now in the hands of Connie O'Connell, Wisconsin's insurance commissioner, who has authority over the deal.
Last week, the Blues officially filed their conversion plan with her office.
"We're going to do a thorough review, seeking the public's input, " said Randy Blumer, deputy insurance commissioner.
The review, Blumer said, includes a public hearing, but a timetable hasn't been developed yet.
"Our position is that there should be full, open debate on our conversion plan," said Tom Luljak, communications director for the Wisconsin Blues.
Last year, the Blues collected almost $370 million in premiums and posted a net income of $1.8 million, according to its annual financial statement.
Luljak said the Blues hopes to convert so it can expand and have access to capital markets.
Since 1994-when the national Blue Cross and Blue Shield Association voted to allow plan conversions-four Blues plans have converted to for-profit companies at their parent level, said Iris Shaffer, spokeswoman for the Chicago-based association. At least three others, including Wisconsin, have proposed converting.
Other Blues plans have for-profit subsidiaries, including the Wisconsin Blues. United Wisconsin Services is the Blues for-profit affiliate, which handles non-Blues-branded insurance products in 38 states, covering 1.8 million people.