A bill to give the state’s largest insurer new flexibility to buy other companies without seeking state regulators’ approval moved forward at the statehouse Wednesday.
House Bill 346 is a top priority for Blue Cross Blue Shield of North Carolina, which says it needs to restructure to stay competitive in an evolving health care industry.
Critics, including state Insurance Commissioner Mike Causey, say the bill goes too far. It would let the nonprofit company kick money up to a newly created holding company that would be further from regulators’ reach. That holding company, also a nonprofit, could use money that the regulated insurance company generates to invest in other health care firms and related companies — a prospect that has raised suspicions for some.
Causey and others fear higher insurance premiums would follow, and they see the bill as a potential end-around past a law the state passed in the late 1990s that was meant to keep Blue Cross from turning into a for-profit company without also creating a multibillion-dollar charitable trust.
Christine Evans, the company’s vice president of public affairs, told lawmakers Wednesday that Blue Cross has proposed the same structure other companies in the state use, including the N.C. Farm Bureau and lender Self-Help Credit Union. With this bill, “we can preserve our nonprofit status and remain a North Carolina-based company,” she said.
The complex measure has bipartisan support at the General Assembly, where most members see it as a way to help one of the state’s most venerable companies — which also happens to be one of the state’s larger campaign donors through its political action committee — compete with for-profit insurers based in other states.
Blue Cross hasn’t said what it wants to buy, but lawmakers say the company needs the power to move faster on investments. The bill would do away with approvals that existing law requires from Causey’s office, and in some cases Attorney General Josh Stein’s. State Rep. John Bradford, one of the bill’s lead sponsors, said competitors like Aetna and UnitedHealthcare don’t have to wait weeks for government permission.
“Obviously health care is a very competitive space, and it’s changing pretty quickly,” said Bradford, R-Mecklenburg.
The measure moved through the Senate Commerce and Insurance Committee Wednesday with limited opposition from committee members, though several said they hope to see amendments before the bill is finalized, which may be early next week. As of Wednesday morning the bill was slated to head through two more committees before it hits the Senate floor. By Wednesday afternoon one had been dropped, and the bill is scheduled to be heard in Senate Rules Thursday morning, after which it will be eligible for a full chamber vote.
Bradford has said he doesn’t want to see the bill change, and that previous negotiations already yielded most of what Causey asked for.
Stein said in a statement that his office reached agreement with Blue Cross last week “on a series of amendments to HB 346 that, if passed, would enable me to support the amended legislation.”
Those amendments would “ensure the continued relevance and vitality” of the state’s conversion law, which limits Blue Cross’ ability to convert to a for-profit company, Stein’s office said. They also would preserve some of Causey’s authority and protect policyholders by ensuring that BCBS retains sufficient reserves, Stein’s office said.
A Blue Cross spokeswoman declined to answer questions about the amendments or confirm a deal was reached. Bradford and a pair of other Senate sponsors said they hadn’t had conversations about new amendments. The bill cleared committee Wednesday without them.
Bradford has said he wants the bill to pass as-is, and quickly. According to the bill text, the measure would take effect immediately.
Under the bill, Causey’s office would continue to regulate Blue Cross’ insurance business under existing law, which gives him authority to negotiate over, and ultimately approve, rates the company charges.
“This bill does not impact rebates,” Bradford said Wednesday. “This bill does not impact premium rates.”
But Causey and his regulatory team say it might. When the Department of Insurance approves rates it considers how much surplus the company has. Under this bill, Blue Cross could shift some of that surplus up to the holding company.
State law also requires Blue Cross to keep a reserve equal to about three months of expenses, but not more than six months. Jackie Obusek, Causey’s chief deputy commissioner, said Wednesday that the law doesn’t explicitly require rebates if Blue Cross exceeds that six-month cap, “but in the past that’s how we’ve utilized it.”
If House Bill 346 passes, Blue Cross could avoid the cap by transferring money to the holding company, Causey has said.
“That’s what Blue Cross is asking to do — is to move money,” Causey said Wednesday.
Some of Causey’s fellow Republicans accuse him of hyperbole and unfairly whipping up support against the bill. They acknowledge that Blue Cross is already a successful company — it covers more than 4 million lives in North Carolina. But it’s losing market share, Sen. Jim Perry said Wednesday, as he and other state senators moved the bill through committee. And last year it lost a major state contract.
“So I understand why they have to reinvent themselves as a company,” said Perry, R-Lenoir. “I don’t want them to fail. I want them to be competitive.”
The debate has also divided progressives. The N.C. Justice Center, a policy and advocacy group, has said the bill “threatens coverage and affordability for 4.3 million policyholders.
But the group’s former executive director, Rick Glazier, sent state lawmakers a letter Wednesday calling the bill a “commonsense solution to benefit the health of our people and our state.” Glazier, a former North Carolina House member, also said he was disappointed with progressive groups “mischaracterizing a bill that will better the health of NC residents.”
The health care session
The Blue Cross bill, which would also allow one other company in North Carolina, Delta Dental, to reorganize, is one of several health care bills moving this session that could remake the industry’s playing field in the state.
Lawmakers approved Medicaid expansion earlier this session, after more than a decade of debate. That would add hundreds of thousands of people to government insurance rolls and generate billions in new spending, though the measure is tied to the state budget, which must pass before expansion takes place.
The Medicaid bill also included rollbacks in state hospital regulations that limit competition in the sector, which in the coming years should boost the number of surgical centers and imaging machines added around the state. Senate budget writers added more rollbacks along these lines to their state budget proposal, but the House may not go along with those proposals as House and Senate negotiators hammer out a final budget.
The Senate budget also included language meant to force large hospitals around the state to cut prices for the State Health Plan, which at roughly 750,000 members is the largest health insurance plan in North Carolina.
Lawmakers have also advanced a bill this session to give UNC Health an antitrust exemption that would aid in mergers and acquisitions. The Senate budget also included this provision and widened it to include ECU Health. Supporters say these changes will help the two public hospital systems partner with rural hospitals.
“We’re looking at them in many respects as the hospital or the provider of last resort, particularly in rural areas,” Senate Republican Leader Phil Berger said recently. “And we want to give them the kind of flexibility that would enable them to actually fill that role effectively.”
The Senate budget also includes hundreds of millions of dollars for new UNC Health and ECU Health facilities.
Berger, R-Rockingham, acknowledged the breadth of healthcare legislation the General Assembly has considered this session, but he said the bills don’t necessarily add up to an overarching strategy.
“Everybody may not look at those things in isolation, but I think our thinking is a little different on each one of them,” he said.