Taking note of the difficulties suffered by other Blues brethren in recent months in transforming into for-profit companies, Horizon Blue Cross and Blue Shield of New Jersey has scrapped its years-long exploration of a conversion.
The insurer, New Jersey's largest, made no public statement concerning the change in strategy, but in a memo that went out to all employees on Aug. 14, President and Chief Executive Officer William Marino cited the difficult regulatory environment. Successful conversion in New Jersey would require satisfying a slew of interests including customers, three state agencies and the Blue Cross and Blue Shield Association, Marino said. Noting several failed attempts in other states in the last six months, Marino said, "We received no indication that New Jersey would not follow the same path."
Conversion plans in Kansas and Washington state have been blocked and waylaid, respectively, in recent weeks (Aug. 18, p. 18). But it was a decision in July by Blue Cross and Blue Shield of North Carolina to abandon its hard-fought conversion plan that really hit home in New Jersey, said Fred Hillmann, a Horizon spokesman. In scuttling their effort, officials at the North Carolina plan cited the lengthy and costly process as well as their fear that regulators' conditions for approval would be prohibitive (July 14, p. 18).
"We've only been at it for 18 months; North Carolina was at it for years," Hillmann said.
Horizon never got as far in the process as other plans across the country. It never filed an application with any state regulatory agency, nor did it submit a proposal with the national Blues association, which licenses the Blues name.
The New Jersey Hospital Association gave the decision a mixed review. "On one hand, we were encouraged that there would have been created a community trust from which millions of dollars could have been dedicated to healthcare as a result of the conversion. On the other hand, we were concerned that premiums would have increased," said Ron Czajkowski, a spokesman for the hospital association.
Horizon resurrected plans to convert in late 2001, when new state legislation established a procedure for setting up a charitable foundation. Five years before that, the insurer had tried and failed to convert into a for-profit mutual by merging with Indianapolis-based Anthem Blue Cross and Blue Shield. That deal fell through over questions concerning Horizon's charitable obligation.
With 2.8 million members, $700 million in reserves at the end of 2002 and steady growth over the last five or six years, Horizon will just concentrate on the business of staying on top, Hillmann said.
"We've expended considerable energy in this exploration process and we believe that this decision is the best decision," Marino said in the memo. "Without the efforts around conversion, we can now concentrate all of our energy on the execution of our business plan and be even more successful."