Blue Cross NC deregulation bill could lead to higher premiums, Insurance Commissioner says

Changes to state law that Blue Cross NC wants could mean increased premiums for millions of health insurance policyholders, state Insurance Commissioner Mike Causey said Monday. 

Blue Cross Blue Shield of North Carolina, a nonprofit health insurer, disagreed with Causey’s assessment. In an email, company spokeswoman Sara Lang said the bill has been revised to include provisions that increase transparency and ensure that the focus on North Carolinians’ health is maintained. 

The state House is set to restart debate this week on a bill that would partially deregulate the state’s dominant health insurer. Blue Cross NC, which has 4.3 million members, wants to be able to create a holding corporation into which it could transfer its assets, property, and ownership of subsidiaries, NC Newsline has reported.  The holding company would not be regulated by the state Insurance Department or anyone else, Causey said. 

In her email, Lang included descriptions of changes to the bill that would increase consumer protections and oversight. 

Causey has been an outspoken opponent of the bill. After his blistering public appraisal last month, the bill’s primary sponsor, Mecklenburg County Rep. John Bradford, said supporters would revise it  to try to satisfy Causey’s concerns. 

Causey said at a news conference Monday not much has changed. 

Under current law, if the company’s contingent reserves meet a certain threshold, Blue Cross NC is required to return the excess to policyholders in the form of refunds or reduced rates.  Under the bill, Blue Cross would be able to reduce its reserves by transferring money to the holding company instead of returning it to policyholders, he said. “This is expected to cause a potentially significant increase in premium rates for policy holders.”

All of Blue Cross NC’s $7.7 billion in assets and its $4.6 billion surplus is directly or indirectly North Carolina policyholder money, Causey said. Blue Cross shouldn’t use policyholder money the way for-profits use investor money, he said. 

“My concern is that North Carolina policyholder money will be used for investments that do not benefit North Carolina, like the purchase of an insurer in Oregon or Washington State,” said Causey, a Republican. 

The bill’s weak reporting requirements would mean that certain facts, such as how much the holding company pays its directors and executives, would be hidden from the public, Causey said. 

Lang’s email included a comparison of the revised bill language with that of the original bill and current law. 

The revisions give the public, health care providers and hospitals the ability to monitor the holding company’s activities, according to Blue Cross analysis. 

The holding company would have to file annual audits with the Insurance Department, according to the company’s description of the revised bill. 

Additionally, if Blue Cross ever converted to a for-profit company, the entire holding company’s value would be used to create a foundation to benefit the health of North Carolinians. 

The provision requiring the creation of a health foundation is current law. The bill’s opponents had argued that it would allow Blue Cross to transfer all its assets to a holding company so if it ever converted to a for-profit company, its insurance subsidiary would not be worth anything. 

The company did considerable work behind the scenes before House bill 346 and its Senate companion were filed. It has bipartisan support, with nearly half of the 120-member House and 30 members of the 50-member Senate signing on. 

Rep. Donna White, a Johnston County Republican and one of the House Health Committee chairs, said her phone was packed with messages about the bill Monday morning .

“A lot of people in North Carolina are concerned about this bill,” she said, as are some of the House Health Committee chairs. 

The new holding company would not be a regulated insurance company, she said, and “could therefore threaten affordability and coverage for millions across the state.”