Press Release September 23, 1998	Contact: McGiffert, Kathy Mitchell or Rafael Ayuso (512) 477-4431 Consumers Union's Southwest Office

CU asks Morales to make value of Texas Blues public
Settlement value of $350 million called either 'highly suspect' or 'total insult'

AUSTIN, TX -- Consumers Union is asking Attorney General Dan Morales to direct the Texas Department of Insurance to release a report on the valuation of the assets of Blue Cross Blue Shield of Texas -- the state's largest health insurer.

The independent valuation report was prepared by Coopers & Lybrand, L.L.P. at the request of the insurance department in connection with the agency's review of the proposed merger between he Texas and Illinois Blues.

"There is no compelling reason for the public not to know the value of Blue Cross Blue Shield of Texas, a nonprofit insurer," said Lisa McGiffert, senior policy analyst for CU's Southwest Regional Office. "Even though a settlement has been reached, disclosure of this information is fundamental to determine if the full market value of the charitable assets will be set aside to serve the public."

On Friday, the Texas Blues and the Attorney General's Office announced a partial settlement of an AG lawsuit seeking to block the merger in which the two parties agreed to settle the value at $350 million. Morales will continue to challenge in court a district judge's ruling that the Texas Blues is not a charity. If the AG prevails, the merged company would pay the state $350 million plus interest - or about $560 million -- over 20 years, according to press accounts.

The $350 million pales in contrast to the value of the California Blues' assets, which were estimated at $3.2 billion. "At best, $350 million is a highly suspect figure. At worst, it is a total insult to the people of Texas. But we can only know for sure if and when the public has full access to the valuation report," McGiffert said.

The AG is required by law to protect the charitable assets of a nonprofit insurer in the event of a merger. The purpose of the valuation report was to determine the fair market price of these charitable assets. McGiffert cautioned: "When the Open Records Act is strictly followed, the public can easily hold the parties accountable. Then we could be certain whether this is a fair deal or not."

CU first requested a copy of the valuation report from the insurance department on August 5, but the agency turned down the request. In the letter to Morales, CU poked holes at TDI's legal arguments, contending that the statute relating to merger approvals makes the documents clearly public.

"Our interest in the valuation report is to establish for the public, including the 1.9 million people covered by this company, an accurate assessment of the worth of the Texas nonprofit BCBS before these Texas charitable assets are incorporated into an Illinois company subject to Illinois, rather than Texas, law," the letter said. "At minimum, this would include a value amount and information regarding what factors were taken into account in determining the full fair market value of this nonprofit corporation."

Consumers Union has been assured by the Texas Department of Insurance that it will fully consider the impact of federal indictments and record fines levied against Blue Cross Blue Shield of Illinois during the summer before approving the merger.