The New Jersey Department of Banking and Insurance announced in September that the state’s largest health insurer had completed its application to pursue a reorganization of its corporate structure. On Tuesday, the agency said it approved Horizon Blue Cross Blue Shield of New Jersey’s submission.
Effective Nov. 1, the state’s sole health service corporation, Horizon Healthcare Services Inc., was reorganized into a mutual holding company structure called Horizon Mutual Holdings Inc. (HMH). The clearance is contingent upon 11 conditions NJDOBI said it imposed to ensure that Horizon operates “prospectively in a manner consistent with the objectives of state law,” including acting in the interest of policyholders and maintaining financially sound insurance subsidiaries.
“Horizon’s members and customers need, and are demanding, more from the health care system. The restructuring approved today by Commissioner Caride preserves Horizon’s historic not-for-profit mission while giving the Company added flexibility to adapt and better serve our members by improving health care quality, convenience, and affordability,” Horizon Senior Director, Public Affairs Thomas Wilson said in a statement. “We appreciate the thorough and complete effort that the Department invested in evaluating the application and are excited to turn our focus to delivering the benefits that this reorganization will deliver to our members, customers and New Jersey’s health care system.”
Legislation passed in 2020 allowed the insurer to pursue the change to its structure. That law also required the commissioner of the Department of Banking and Insurance to review the application for completeness and for public hearings to be held about the application.
“As required under the law, the department conducted a comprehensive review of Horizon Blue Cross Blue Shield of New Jersey’s plan to reorganize as a mutual holding company and determined that it met the requirements for approval,” Commissioner Marlene Caride said in a statement. “In order to promote additional protections, the department has imposed conditions on the approval that Horizon must meet so that the intent of the law is maintained into the future.”
As laid out in the department order, those include: offering comprehensive health coverage in each of the state’s 21 counties, a dividend moratorium, minimum capital requirements in excess of statutory minimums and required quarterly reporting of enterprise-wide capital. The final condition requires the company and its officers to provide a fully executed written copy of a parental guarantee to the commissioner within 90 days of the order.
“It is important to note that under the law, the company must maintain its mission as a charitable and benevolent institution, and the state Attorney General has confirmed that any nonprofit mutual holding company formed under the law remains subject to its oversight,” Caride added.
During its three public hearings on the matter, NJDOBI said it received oral or written testimony from approximately 600 people.
The Department also opted to pursue a health impact study, voluntary under the 2020 law. Prepared by Manatt, Phelps & Phillips LLP, the report specifically examines Horizon’s commitments from its application, the areas where restructuring could affect policyholders, and considers subjects that will require ongoing monitoring, specifically identifying the insurer’s investments in the state and consolidation and antitrust challenges.
Ultimately, NJDOBI said the study concluded that the restructuring would maintain policyholder benefits associated with Horizon’s unique status in the New Jersey market, including explicit commitments by the company to both its statutory mission and charitable status.
Ahead of its conclusion, finding “firm basis” for the approval, the report concludes that prior efforts to update Horizon’s structure failed due to their focus on a “conversion to for-profit status as the key to modernization.” The 2020 law, rather, “offered a path to modernization for the insurance companies, but the essence of the law was to make modernization a subordinate goal within a new holding company structure that retained Horizon’s policyholder mission and charitable status as the ultimate, controlling goal.”
As permitted by law, the department engaged Manatt, Phelps & Phillips LLP and Manatt Health; Oliver Wyman Actuarial Consulting Inc.; and Rudmose & Noller Advisors LLC to assist in evaluating Horizon’s application. All public information related to the application and approval, along with additional documents are available here.
Editor’s note: This story was updated at 8:29 a.m. ET on Nov. 2, 2022, to include comments from Horizon Blue Cross Blue Shield of New Jersey.