By Todd Cohen
In asking regulators for a clean bill of health for its commercial makeover, Blue Cross has given North Carolina a chance to take its own civic pulse – and the respective checkups show a well-fed offspring raring to leave the nest of its overwrought and undernourished parent.
Its plan to become a for-profit business should have fueled a robust debate about whether Blue Cross can deliver better insurance products, rates and service if it sheds its nonprofit status and sells stock, all of which initially would be owned by a new charitable foundation focused on health.
Instead, political posturing, corporate brazenness, watchdog righteousness and consumer apathy have marred the tedious but crucial job of sorting through the mind-numbing details and far-reaching implications of Blue Cross’ conversion plan.
Huffing and puffing like the village bully, the Insurance Department fired some cheap shots at Blue Cross, saying it had solicited a “backroom deal” with the expectation the department would “shrink like little girls” from an “ultimatum” to signal whether it would okay the conversion.
Blue Cross clearly had warned it might pull its conversion proposal if regulators failed to telegraph their likely response to it. And, treating customers and taxpayers as bit players in the debate, the insurer has made little effort to explain to the public why it believes it can best serve the state as a for-profit business, saving its big pitch for three public hearings and three invitation-only luncheons for business leaders.
And some consumer advocates, apparently investing philanthropy with moral absolutes beyond reproach or compromise, and equating business with a breeding ground for corruption rooted in naked greed, want the new foundation to function as Blue Cross’ in-house broker and ethics cop.
The parties need to grow up. Access to health care is a tough and complex issue, Blue Cross will be a big player whether it wears a nonprofit or for-profit hat, and the best deal for North Carolina depends on sticking to and sharing the facts, thinking clearly and standing in shoes other than one’s own.
Formed in 1933 as the state’s first health insurer, Blue Cross operated as a nonprofit and did not have to pay taxes until 1986 when, its CEO says, competitors persuaded the Internal Revenue Service to require it to pay taxes to “level the playing field.”
Now, Blue Cross says, the field needs to be leveled again because its nonprofit status keeps it from raising the capital it needs for acquisitions, new technology and other improvements to let customers pick and choose coverage from a flexible menu of products and rates it wants to develop.
Blue Cross also says its business plan calls for modest “pre-tax yields,” or annual profits, of 4 percent of revenue, and promises it will not raise rates or reduce coverage – although it says it cannot control industry-wide growth in premiums of 20 percent a year.
Ultimately, Attorney General Roy Cooper and Insurance Commissioner Jim Long must decide whether Blue Cross would better serve North Carolinians as a for-profit business.
While the prospect of a new foundation that could be worth as much as $3.5 billion creates a powerful incentive to look favorably on the conversion, regulators must be convinced that turning Blue Cross loose in the marketplace is the best way to ensure affordable and accessible health insurance for North Carolinians.
They also must weigh the role the new foundation should play in Blue Cross’ big business decisions – and the impact the foundation’s corporate role would have on the value of its Blue Cross stock.
Based on nominations screened by key groups selected under state law, Cooper has named a solid board for the foundation.
Despite their sometimes shrill rhetoric, regulators and watchdogs rightly want the foundation to be able to protect its shareholder role and the value of its Blue Cross stock.
And Blue Cross, tugged one way by its parent association and another by regulators and watchdogs, has tried to retool its plan to give the foundation a strong but limited role all parties can live with, and to protect shareholders against corporate misdeeds and self-dealing.
Politics, a messy business in a democracy, is the art of compromise. And while politics inevitably will drive the final decision on Blue Cross, North Carolinians will best be served by keeping the debate and deliberation civil, sober and focused on the critical issues at stake for our state.