In an anticipated move, Blue Cross and Blue Shield of North Carolina, Chapel Hill, formally announced that it will file with state regulators to convert the 2.5 million-member health plan to a for-profit company valued at upward of $1 billion.
Meanwhile, another Blues plan seeking to go for-profit, CareFirst Blue Cross and Blue Shield, which covers 3.1 million members in Delaware, Maryland and the District of Columbia, released a consultant's report to bolster its case, which has recently come under attack. CareFirst, Owings Mills, Md., wants to convert so that it can be acquired by WellPoint Health Networks, Thousand Oaks, Calif., for $1.3 billion (Nov. 26, p. 8).
The North Carolina Blues expects to file its conversion plan with state regulators during the first week of January, spokeswoman Michelle Vanstory said. A 1998 North Carolina law gives the state attorney general and insurance commissioner a minimum of 120 days after the filing to review the plan and negotiate the terms of the conversion. Blues officials hope to have the conversion completed in May or June, Vanstory said.
In a statement, the health plan said being a for-profit company would increase its access to capital, which would pay for technology improvements that would lead to better claims processing and online health information for its members.
Public-health advocates welcome the conversion because state law requires the establishment of a not-for-profit healthcare foundation that will own 100% of the stock of the new, for-profit Blues, said Adam Searing, project director for the North Carolina Health Access Coalition.
"The creation of a $1 billion-plus foundation for healthcare could really be a boon for vulnerable people in North Carolina," where about 1.5 million people lack health insurance, Searing said. "I think if it's done right-and the structure is there to do it right-then it can work out for everybody." He said the $1 billion estimate may be low, because it was generated four years ago when the Blues-conversion law was being debated and written; some estimates are now as high as $2 billion, he said.
A plan for the foundation's divestiture of the stock will be part of the negotiations with state officials, Vanstory said, because the Blue Cross and Blue Shield Association in Chicago, the national group that licenses Blues plans, requires that no stockholder own more than 5% of the stock of a Blues company. The North Carolina Blues has not formed a plan for an initial public offering of stock, she said.
Vanstory said there are no plans to sell the converted health plan to one of the larger for-profit insurance companies that own multiple Blues plans. "There's never been one Blues plan buying another that did not want to be bought, and our company is not for sale," she said.
Searing said state regulators are amenable to the North Carolina Blues' conversion. That contrasts with the reception that CareFirst is getting to its plan, especially from politicians in Maryland who fear the state won't be adequately compensated for the loss of its only locally based not-for-profit health plan (Dec. 10, p. 22).