Horizon abandons quest to become for-profit

A lot has happened in the health insurance industry since August 2008, and New Jersey's Blues plan officially has conceded that as times changed, so has its vision of the company's future.

In a letter to the state's Dept. of Banking and Insurance, Horizon Blue Cross Blue Shield of New Jersey on May 17 withdrew its nearly three-year-old application to convert to for-profit status. "Horizon's board of directors and management have reconsidered the advisability of continuing to pursue conversion, given the current and foreseeable changes in the business environment, and have concluded that it is not in the best interests of Horizon at this time," the letter said.

The health plan noted that since applying to convert to a for-profit plan in August 2008, Horizon has adapted its business to comply with the Patient Protection and Affordable Care Act, among other changes.

Marshall McKnight, spokesman for the New Jersey Dept. of Banking and Insurance, said the withdrawal does not change the way the plan will be regulated, because Horizon signaled the state two years ago that it wasn't actively working on its conversion.

"They told us unofficially, not on a formal level, in June 2009 that it was 'pencils down,' " McKnight said. "There has been a period of inactivity from that time on."

Opponents of the change to for-profit feared that the company would become an acquisition target for WellPoint, the for-profit Indianapolis-based health plan that operates Blues plans in 14 states.

A nonprofit insurer can better serve the needs of the state, said Larry Downs, general counsel of the Medical Society of New Jersey, who will take over as CEO effective July 1.

"They're more community-based and in theory more responsive to their insured and their sponsors. [At for-profit plans], the shareholder demand for profits creates more pressure to make money than to do the right thing," he said.

Downs said that with new executives at the medical society and Horizon, where Robert Marino took over as CEO in March, the two sides should be able to renew cooperative work that stalled in recent years.

"We need a strategic relationship with the state's largest insurer, and we haven't had any dialogue in that regard for the past three to five years," he said.

This was not the first time Horizon applied to become a for-profit company. It submitted its first application in 2000 but withdrew it five years later because of conflicts with state authorities over terms of the conversion.

In 1997, Horizon, then Blue Cross Blue Shield of New Jersey, terminated a merger with Anthem, a predecessor company to WellPoint. Anthem had not yet become a for-profit company. The merger was scotched after a state court ruled that the New Jersey Blues was a charitable corporation and, as such, must turn over its assets to a charitable foundation as a condition of the merger.