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SAN FRANCISCO, CA — In a court decision that will impact Blue Cross and Blue Shield of New Jersey’s pending application to convert to a for-profit mutual insurance company, late this afternoon Judge Alvin Weiss ruled that Blue Cross and Blue Shield of New Jersey (BCBS of NJ) is a charitable organization.
"We’re thrilled by Judge Weiss’ decision, but not surprised," said Julie Silas, staff attorney with Consumers Union, nonprofit publisher of Consumer Reports. "Consumer groups and regulators have been taking this position all along."
The judge issued a declaratory judgment holding that the plain language of New Jersey’s state law makes it clear that Blue Cross and Blue Shield is a charitable organization. New Jersey law requires that assets of a charitable organization must continue to be used for their original charitable purposes and cannot be used to benefit private individuals.
"For months BCBS of NJ wasted time and money arguing that it was not a charitable organization when the law it is organized under declares it to be a ‘charitable and benevolent institution,’" added Silas. "No matter how many times BCBS of NJ tried this argument, it failed."
"Consumer groups have worked long and hard to ensure that millions of dollars meant for charitable health care were not handed over to private individuals," said Silas. "New Jersey citizens can now look to the Department of Banking and Insurance and the Attorney General to protect the assets of BCBS of NJ."
"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," Silas said. "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 turned over to foundations for the health care of the community when Blue Cross of California converted to a for-profit corporation."
