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SAN FRANCISCO, CA -- North Dakota’s Blue Cross and Blue Shield (BCBS) is a charitable organization and must protect and preserve its charitable assets when it converts to a mutual insurance company, according to Consumers Union of U.S. Inc., nonprofit publisher of Consumer Reports. BCBS of North Dakota filed documents with the state’s Department of Insurance on January 30 proposing to convert from a nonprofit health services corporation to a mutual insurance company.
In addition to North Dakota, many Blue Cross and Blue Shield plans across the nation have already converted or are in the process of converting from health service corporations, including plans in California, Colorado, New York, New Jersey, and Texas.
"Millions of charitable health care dollars are at stake for North Dakota residents," said Julie Silas, staff attorney with Consumers Union. "In New York and Colorado, Blue Cross plans have acknowledged the debt they owe to the public, and have agreed to distribute all their assets to charitable foundations when they change their corporate status. Regulators and the courts in California and Missouri have found that their BCBS plans had charitable obligations. In California, more than $3 billion dollars was distributed to foundations for the health care of the community."
"New Jersey BCBS, on the other hand, has initiated a public relations campaign to pretend it is not a charity," said Silas. "The New Jersey Attorney General, however, called BCBS’s bluff and issued an advisory opinion stating that the BCBS plan is a charity. We hope that BCBS of North Dakota won’t follow in the footsteps of New Jersey, and instead will be proud to acknowledge its more than fifty year history as a charitable corporation."
In North Dakota, the BCBS plan is a charitable corporation which, under North Dakota law, cannot be owned or provide profit to any individual, including policyholders. If it changes to a mutual insurer, it will be like a stock insurance company, organized to directly benefit private individuals, its policyholders. It will hold no community or public purpose.
"If BCBS of North Dakota changes its corporate status, it must preserve and protect its charitable assets so that they continue to be used for charitable purposes," said Margo Hunter, Fellow for Economic Justice with Consumers Union. "North Dakota law requires it and so do BCBS of North Dakota’s own Articles of Incorporation."
"Regulators and the community should closely monitor BCBS of North Dakota’s proposal to convert to a mutual insurer," said Hunter. "Across the country consumer groups and regulators have successfully protected the millions of dollars of charitable health care funds at stake in these transactions."
In some states, regulators who originally approved a company’s conversion from a health services corporation to a mutual insurer are retroactively holding the former health services corporations responsible for charitable obligations. In Ohio, Republican Attorney General Betty D. Montgomery recently announced a more than $5 million charitable settlement with Central Benefits Mutual Insurance Co., nine years after it converted from a health services corporation to a mutual insurance company.
