National Blues group rejects North Carolina conversion strategy

The affiliate is threatened with loss of its Blues designation if its plan to turn for-profit goes through.

By Cheryl Jackson, AMNews staff. Sept. 9, 2002.

Blue Cross Blue Shield of North Carolina's plan to convert into a for-profit company has hit a snag -- it might no longer be a Blues plan if its conversion is successful.

The Blue Cross Blue Shield Assn., which controls the Blues trademarks, on Aug. 19 said that if Blue Cross Blue Shield of North Carolina's plan to put 100% of its stock in the hands of a new charitable foundation went through, the plan would lose its Blues designation. Blues association rules require that a foundation or individual could own no more than 5% of the shares in a for-profit Blues plan.

However, a 1998 state law requires the Blues to put 100% of its stock in a foundation as a prerequisite to a for-profit conversion.

The North Carolina plan had hoped to satisfy both sides by putting 5% of shares in the hands of the foundation and 95% of shares in a foundation-controlled voting trust. But the Blues association deemed that plan unacceptable. Some Blues critics in North Carolina also criticized the arrangement, but for the opposite reason -- they said such a setup doesn't give the foundation enough power.

"Ultimately, without the association's approval we cannot and will not convert," North Carolina Blues President and CEO Bob Greczyn said in a prepared statement.

Doctors in that state are not interested in seeing a quick approval process, fearing the plan's growth or acquisition, said Bob Seligson, executive vice president and CEO of the North Carolina Medical Society.

Plan officials still plan to move forward with the conversion, spokeswoman Michelle Vanstory said. The company says part of its conversion deal would be a promise to remain based in North Carolina. [...]