Press Release Friday, March 10, 2000

Contact: Bob Peterson or Wade Williams, ABC for Health: 608-264-6950 Jeff Spitzer-Resnick, WI Coalition for Advocacy: 608-267-0214 Kathy Lee, Consumers Union: 415-290-6681 or 415-431-6747

Madison, WI - A group of consumer organizations continued to raise concerns today about the proposed Blue Cross Blue Shield United of Wisconsin (BCBSUW) conversion plan, charging that it fails to distribute the nonprofit insurer's assets fairly and was conceived without sufficient public input. The advocates called on Insurance Commissioner Connie O'Connell to make sure that BCBSUW's charitable assets are turned over to an independent, publicly accountable foundation empowered to determine the best use of the funds.

"These nonprofit assets belong to the people of Wisconsin who have supported the company for decades with premiums and tax breaks," said Robert A. Peterson, Executive Director of ABC for Health. "We urge Commissioner O'Connell to make sure that these funds go to meeting the state's most pressing public health needs."

Consumer organizations raised their concerns at a news conference held prior to a day-long hearing on the conversion plan organized by Commissioner O'Connell. If the current BCBSUW conversion plan is approved by the Commissioner, the company plans to turn over its stock to a limited-life foundation established to give the funds exclusively to the Medical College of Wisconsin and the University of Wisconsin Medical School.

The plan represents a significant departure from similar conversion transactions in other states. Under the charitable trust doctrine, the assets of a charitable nonprofit corporation must remain dedicated to the historic mission of the nonprofit if the corporation is dissolved or reorganized as a for-profit. These assets must be protected in perpetuity because charitable nonprofits receive such benefits as special rates of reimbursement or discounts, donations, volunteer service, and preferential tax treatment. BCBSUW was established in 1939 to expand access to health care and improve the health of the people of Wisconsin. The medical schools have indicated that they would use the funds primarily for medical research and education as well as to address public health needs. Most of the funds would be added to endowments of the two institutions and expenditures controlled by the medical school deans.

"Passing these charitable assets to the medical schools to support research and education would fall far short of Blue Cross' historical mission," said Jeff Spitzer-Resnick, Managing Attorney of the Wisconsin Coalition for Advocacy. "Wisconsin should follow the lead of other states that have handled Blue Cross conversions by establishing a foundation dedicated to meeting the unmet health care needs of its most vulnerable citizens."

"Unfortunately, the public has had insufficient input in this process," said Ellen Rabenhorst, Chair of the State Legislative Committee of Wisconsin AARP. "We are concerned that a grant that goes just to the medical schools will fail to address a broad range of public health needs."

The consumer groups have also charged that the decision to endow the two universities violates other widely accepted standards for ensuring public accountability in determining the best use of charitable assets following a nonprofit conversion. Recent BCBS conversions in other states have offered extensive opportunities for members of the public to address a wide range of issues affecting the mission, structure, and governance of foundations proposed to receive nonprofit assets. Last July, BCBSUW officials announced their plan to turn over the insurer's charitable assets to the medical schools without consulting the public or conducting a single hearing. Public hearings conducted by the medical schools following the announcement solicited limited comment on public health needs, but did not allow questioning about whether the two institutions were best equipped to address those needs.

"The public has a right to help determine how the proceeds from the conversion will be spent," said Kathleen W. Lee, Philanthropic Policy Analyst at Consumers Union. "But Blue Cross executives have usurped the public's role by announcing their unilateral decision to turn over all the funds to the two medical schools."

Unlike independent conversion foundation boards that have been established in other states, the board proposed for the BCBSUW-Public Health Foundation will be controlled entirely by Blue Cross and the two medical schools. The board does not have any decision-making authority over the use of funds, but is simply a transfer mechanism for exchanging the stock and conveying the proceeds to the two medical schools.

"We hope Commissioner O'Connell will ensure that Wisconsin has a health foundation accountable to the public and not Blue Cross and the medical schools," said Deborah Cowan, Philanthropic Project Director of Community Catalyst. "The record of other health conversion foundations around the country demonstrates that a wide range of community based organizations has the capacity to improve public health and address unmet health needs. An independent foundation can weigh the merits of different approaches to balance competing interests."