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Press Release August 4, 1998 |
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SAN FRANCISCO, CA, JEFFERSON CITY, MO and ST. LOUIS, MO – For the second time in as many years, a Missouri court has ruled against Blue Cross and Blue Shield of Missouri (BCBSMo), holding that "In creating and operating RightCHOICE [it’s for-profit subsidiary], Blue Cross effectively abandoned its nonprofit purposes to engage in a business for profit." The Missouri Court of Appeals observed that "despite the fact that RightCHOICE earned millions of dollars in profits, the subsidiary did not utilize those gains to fulfill Blue Cross’s nonprofit obligations." The Missouri Court of Appeals Western District upheld an earlier decision by the Circuit Court of Cole County.
"Consumer groups have worked long and hard to ensure that millions of dollars meant for nonprofit charitable health purposes were not handed over to private individuals," said Julie Silas, Staff Attorney with Consumers Union, nonprofit publisher of Consumer Reports. "This decision once again supports what consumer groups and regulators have been asserting for years, that BCBSMo violated the public’s trust when it operated RightCHOICE at the expense of its nonprofit obligations."
In anticipation of the appellate court decision, regulators and BCBSMo announced in April that they were in settlement talks and that BCBSMo agreed to preserve its nonprofit assets in a new charitable foundation. Consumer groups, led by Missouri Consumer Health Care WATCH Coalition, urged regulators to consider several outstanding public concerns, including ensuring that 100% of the assets are preserved and that consumers are involved in the establishment of a new foundation. Two weeks ago, regulators and BCBSMo announced that they were unable to reach a final settlement within the given 90-day period, but that an agreement was expected by September 15, 1998.
"The appellate court decision is an important accomplishment for consumers," said Peter De Simone of Missouri Association for Social Welfare (MASW). "It is a rare victory for consumers against the corporate takeover of medicine."
While the consumer groups applauded today’s ruling as a victory, they remain concerned about the pending settlement resolution. "Today’s ruling is a victory for consumers," said Joel Ferber, attorney for Reform Organization of Welfare (ROWEL). "The court decision should embolden the Attorney General to settle for nothing less than full protection of the nonprofit assets of BCBSMo for the people of Missouri."
"The settlement should establish a foundation dedicated to providing health care to vulnerable people," said DeSimone. "Its value should be the full and fair value of BCBSMo before it became a for-profit. It’s Board of Directors should be heavily represented with the consumer groups who fought for the enforcement of the nonprofit laws."
The Missouri appellate court decision is one in a string of cases in favor of consumers and regulators and against BCBS plans. Courts in New Jersey ruled that the New Jersey BCBS plan has nonprofit purposes that cannot be denied. In Georgia, eight nonprofit consumer groups sued their BCBS after the plan transferred all its nonprofit assets into a for-profit corporation without preserving any assets for nonprofit purposes. The groups settled the lawsuit in June because BCBS of Georgia agreed to establish a new charitable foundation. And, in Colorado and New York, BCBS plans have agreed to preserve 100% of their assets for nonprofit purposes when they convert to for-profit status.
