NORTH CAROLINA BLUES: Agree To Charity Trust
Blue Cross and Blue Shield of North Carolina surprised state legislators and health care advocates Tuesday when it announced that it would agree to establish a charity trust "if the nonprofit insurer goes for-profit." The Raleigh News & Observer reports that Blue Cross President and CEO Ken Otis told legislators that Blues officials "believe that citizens of North Carolina do in fact have an interest in the company upon conversion." The statement marks a sharp turn in the debate that began last year after a "bill that would have formulated rules for conversion -- but wouldn't have required Blue Cross to compensate North Carolina taxpayers for decades of tax breaks -- almost sailed through the General Assembly." However, several questions remain, "including who would appoint the board of a charitable trust and whether Blue Cross would be required to transfer 100% of its fair market value to such an entity." State Sen. Tony Rand (D) said, "I think we went a long ways toward resolving the threshold questions. Now we'll just have to determine the details of what we decide to do."
Otis suggested that lawmakers model the conversion plan after the charitable trusts formed when California Blue Cross converted to for-profit status. When California Blue Cross was converted, "two ... charitable trusts with assets totalling $3.2 billion, primarily in the form of stock, were formed." According to Otis, this model would allow Blue Cross to "retain its assets and pay claims, while benefitting 'the health care needs of North Carolinians.'" Otis also noted that the company does not have immediate plans to convert to for-profit status. Although the proposal has won preliminary support from House Majority Leader Leo Daughtry (R), Natalie Seto, a conversion expert with Community Catalyst, said that there are problems with the California conversion plan. According to Seto, Blue Cross of California is allowed to "make potentially lucrative business changes -- including forming joint ventures with profit-making companies -- and call such moves 'restructuring.'" She said she would "advise North Carolina lawmakers to adopt a 'broad definition of conversion that will encompass the potential for de facto conversions.'" The next meeting on the conversion bill will be held March 3 (Heath, 2/4).