Gov. Chris Christie shocked political observers in February when he proposed that Horizon Blue Cross Blue Shield pay some of its annual surplus into a fund for drug treatment and care for the poor and uninsured.
His effort to get the state’s largest health insurer to do so willingly fell short. He said Horizon should consider giving up its nonprofit status if it won’t contribute $300 million to such a fund. Horizon offered $135 million, but in return it wanted some financially favorable regulatory changes.
So around the end of last month, Christie submitted draft legislation to give New Jersey the authority to redirect some excess Horizon surplus itself.
This strikes many as a state overreach into the affairs of a private corporation, especially those who haven’t followed the issue of massive nonprofit health insurers amassing vast surpluses.
The N.J. Business & Industry Association opposed the plan, saying it would be imprudent to redirect Horizon surplus funds in this era of health insurance uncertainty and might put policyholders at risk.
Standard & Poors said Horizon’s credit outlook might be undermined if it is forced to share some of the capital reserves built up by its $12 billion annual revenue.
Christie says Horizon and other health-service corporations are fleecing taxpayers and consumers, “profiting in staggering and offensive amounts” from the expansion of Medicaid in New Jersey. “Horizon is a taxpayer-supported charity with a responsibility to prioritize and facilitate access to quality health care for New Jerseyans,” he said. “But it has lost its sense of mission and instead become a Medicaid profiteer.”
Christie’s position and proposal continue a skeptical view of giant nonprofit health insurers that has been developing for many years.
Concerns initially focused on nonprofits that built up massive surpluses and then converted to for-profit status, giving executives windfall payouts in the process.
The respected and credible Consumers Union has long tracked and analyzed the self-rewarding actions of nonprofit insurers. In a major report in 2010, it questioned why some Blue Cross Blue Shield plans with large surpluses nonetheless imposed double-digit rate increases on policyholders.
Among the recommendations from the publisher of Consumer Reports was one largely identical to Christie’s: “If surplus is found to be excessive, insurers should … spend the money for charitable purposes such as community health programs or affordable-coverage initiatives.”
A Consumer Reports update in 2015 found that nine BCBS insurers it analyzed collectively had more than $12 billion in surplus funds.
NJBIA’s criticism about one aspect of Christie’s proposed legislation looks justified. He would allow the Legislature to add four members of its choosing to Horizon’s board. That’s a bad idea that could lead to disastrous political meddling.
But auditing Horizon and other health-service corporations, holding public hearings on them and considering the use of a portion of their surpluses to expand care access for underserved people have merit — enough that the Legislature should seriously consider such measures.