Doctors want further scrutiny of Horizon for-profit conversion

Opponents of the for-profit conversion of Horizon Blue Cross Blue Shield of New Jersey want state regulators to ask for a new application from the plan that takes into account the failing economy since the plan's application in August.

The Medical Society of New Jersey, the Alliance for Advancing Nonprofit Health Care, and QualCare, a New Jersey-based hospital and physician-owned nonprofit health plan, wrote a letter to the director of the New Jersey Dept. of Banking and Insurance and the state attorney general, calling for Horizon to withdraw its application or for the state to require a new one. The groups argued that the application should be amended to reflect the changes to the economy that have sent stocks plummeting and frozen the credit market.

"The political and economic world that Horizon knew [when it first applied] has changed substantially," said the letter. But it appears not to have interrupted the state's deliberations or convinced Horizon of the need to reconsider.

Paul Penna, spokesman for the state Dept. of Banking and Insurance, said the department had no authority to tell Horizon to resubmit its application. "It's Horizon's application, so it's not up to us to make a determination whether Horizon should or should not pull their application."

Bruce McPherson, president and CEO of the Alliance for Advancing Nonprofit Health Care, said the group had not received any official response to the letter. Both the Dept. of Banking and Insurance and the attorney general in October asked Horizon for more information to supplement its application, unrelated to economic conditions. There is no set deadline for Horizon to respond or for the state to reach a decision.

Horizon spokesman Tom Rubino said he hadn't seen the letter, but the economic crisis has done nothing to change Horizon's reasons for wanting to convert and has heightened the need for the economic benefit to the state that Horizon expects.

Part of Horizon's rationale for conversion to a for-profit includes a need to access capital that it is unable to obtain as a nonprofit and the benefit to the state that a conversion would generate. By law, upon conversion, the value of the company would be held by a foundation charged with improving the state's health care system.

"[Converting] unlocks the value of Horizon for the purposes of improving the state's health care system, and it does it without requiring an increase in taxes on the people of New Jersey," Rubino said. "If it's $5 billion, $8 billion or $10 billion that is raised, that money is not available if the company doesn't convert."

But the medical society and allies believe the economic crisis casts the likelihood of those supposed benefits into doubt, particularly because they think Horizon probably predicted a much higher stock price than an initial public offering would merit now.

McPherson said the economic downturn also threatens the feasibility of rapid national health care system reform. That means the changes that Horizon claims it needs to prepare for are not going to happen as quickly as some expected, he said. The alliance's members include many of the nation's nonprofit Blues plans -- though not Horizon -- and nonprofit hospital systems.

"For anybody to even take the time ... looking over a proposal that does not reflect any reality today would be a waste of everyone's time," McPherson said.

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