Why Blue Cross Blue Shield companies are reorganizing

Rylee Wilson – a day ago

Two nonprofit Blue Cross Blue Shield companies will reorganize this year, hoping to stay competitive with for-profit rivals like UnitedHealth Group and Aetna.

In June, a New Jersey court struck down a challenge from a nonprofit and a nurses union seeking to prevent Horizon Blue Cross Blue Shield from reorganizing as a nonprofit mutual holding company. The state’s Department of Banking and Insurance approved the reorganization in November 2022.

North Carolina legislators approved Blue Cross Blue Shield of North Carolina’s proposal to reorganize, adding a nonprofit holding company. North Carolina Gov. Roy Cooper signed the bill in June.

Both payers will remain nonprofit entities but will be able to add for-profit subsidiaries, like provider groups or PBMs, under the reorganizations. For-profit payers are acquiring provider groups, home health providers and more.

Representatives for Blue Cross NC and Horizon said the organizations are necessary to continue competing with for-profit peers.

“We must be in a position to compete (with for-profit companies) if we are to continue our mission,” Jennifer Velez, senior vice president and general counsel for Horizon, said at a hearing in October over the proposed reorganization.

Blue Cross NC representatives said the company was subject to burdensome regulations from the state’s legislature.

“Today, Blue Cross NC, a North Carolina company, is subject to outdated and overly restrictive regulatory rules that only apply to us. We are simply asking you to help level the playing field so that we can be subject to the same rules as our competitors and provide the services you and North Carolinians expect in today’s market,” Blue Cross NC Board Chair Ned Curran wrote in a letter to legislators.

Earlier this year, Blue Cross NC lost out on a $17.5 billion dollar contract to administer the state’s employee health plan to Aetna, a contract it had held for nearly 40 years. Blue Cross NC is challenging the decision in court.

Some officials are concerned the reorganizations will raise premium costs.

In North Carolina, state insurance commissioner Mike Causey and treasurer Dale Folwell both criticized the reorganization.

Mr. Causey said the reorganization would raise premiums.

“The department and I have received hundreds of emails, calls and letters from the public from across the state, and not one person has stated that they disagree with our position. I’m very concerned that consumers’ concerns are falling on deaf ears,” he said in May.

Blue Cross NC called Mr. Causey’s comments a mischaracterization of the effect of the reorganization. Under the terms of the legislation the state approved, any investments by Blue Cross NC’s for-profit holding company must benefit affordability, access, better health or customer experience.

A third affiliate, BCBS Louisiana, will change its operating structure this year. The company is set to be acquired by Elevance Health, with the $2.5 billion deal expected to close later this year.

BCBS Louisiana will use the funds from the acquisition to establish a $3 billion foundation to address health equity, and will pay some of the proceeds to its members.

BCBS Vermont is also set to be acquired by nonprofit BCBS Michigan. Pending regulatory approval, BCBS Vermont would become a subisidiary of BCBS Michigan, but retain its name, leadership and headquarters.

“Partnerships with other Blue Plans, especially with shared missions, is critical in the rapidly changing healthcare landscape,” Don George, president and CEO of BCBS Vermont, said about the deal. “Together, sharing expertise and technology, we can bring better solutions to our members, customers, provider partners and communities.”