Horizon pursues technical change to corporate structure

Anthony Vecchione//November 26, 2019//

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Legislation introduced on Nov. 25 would make it possible for Horizon Blue Cross Blue Shield (BSBSNJ) to become a not-for-profit mutual and adopt the same corporate form as Blue’s plans in 18 other states.

The company said that the new corporate form would preserve Horizon’s obligation to operate for the benefit of its members and its historic not-for-profit status, while allowing the company to better respond to a rapidly evolving health care marketplace by permitting increased investments in new technologies and innovations that positively impact members and the state economy.

The legislation, introduced by Assemblyman John McKeon, D-27th District, establishes a process through the Department of Banking and Insurance that would enable the change.

Not-for-profit mutual companies are owned by their policyholders, not outside shareholders, and re-invest generated income into activities that benefit policyholders.

In a statement Horizon BCBSNJ Chairman, President and Chief Executive Officer Kevin Conlin said, “Our members are and have always been Horizon’s top priority. Our current structure was created decades ago at a time that could not have anticipated that the health care system would become what it is today, let alone what it may be five years from now.

Just the facts

Horizon BCBSNJ would continue to be overseen by a board of directors with significant public representation, including an increased number of members appointed by the governor, senate president and assembly speaker.
Other not-for-profit mutual insurers include: Liberty Mutual, Mutual of Omaha, Nationwide Mutual Insurance Co. and New York Life.
Horizon said, studies conducted by Rutgers University and Econsult Solutions predict that over the next decade the change will produce: $4.16 billion in additional economic output; 1,958 new jobs; and $62 million in added state revenue. For every $100 million in investment in NJ firms, the state can expect $206 million in additional economic output
Horizon said the structural change, and increased flexibility, would allow it: to make greater investments in new, consumer-friendly technologies (such as expanded access to telemedicine and wearables); new models of care and collaboration that address social determinants of health and economic barriers to positive health outcomes; additional web and mobile-based tools to help keep costs under control; and on-demand services to help members manage critical health services, like substance use disorder and mental health.

“This technical change to our corporate form reaffirms Horizon’s commitment to our historical mission as New Jersey’s not-for-profit health insurer, but gives us the flexibility to accelerate the pace and scale of investments that will help us continue to deliver for our members in the face of a rapidly changing health care marketplace,” Conlin added.

Horizon BCBSNJ is currently a not-for-profit health services corporation, a corporate form that restricts its ability to invest in technologies and innovations that support its goal to improve health care cost, quality and consumer experience. Specific limitations include caps on the size of investments the company can make, a ceiling on business outside of the core commercial insurance services, and an inability to use a modern holding company structure commonly used by health insurers and important to facilitating investments beneficial to members

Senate President Steve Sweeney, D-3rd District, said that he supports the legislation.

“This bill will help Horizon to move forward with reforms that aid health care consumers and enhance the quality of care they receive. These changes will better enable New Jersey’s only not-for-profit health insurer to modernize the way it is organized so it can invest more in member benefits, including consumer technology and preventive care,” said Sweeney.

An administration official with knowledge of the discussions rejected the proposal, saying there were “serious concerns… with the way that everything is structured” in the legislation.

The source said that the bill was essentially a “run-around the laws” — by letting Horizon go from a not-for-profit health insurance company to a not-for-profit mutual, rather than a for-profit.

“This kind of seems like there are windfalls for insurance executives at the expense of three million [state residents] who have Horizon,” this person said.

Daniel J. Munoz contributed to this story.