Insurer Keeps Nonprofit Status Blue Cross' Court Victory Disappoints Regulators

Article excerpt

A judge ruled Monday that the Missouri Department of Insurance cannot force Blue Cross and Blue Shield of Missouri to place hundreds of millions of dollars of its assets into a charitable trust to pay for health care for the poor.

The ruling hands the state's largest insurer a definitive victory in its battle with regulators over whether Blue Cross became a for-profit company in 1994, when it created its for-profit subsidiary, RightChoice Managed Care Inc., and then moved most of its business into it.

An Insurance Department spokesman said Monday that his office was disappointed with the ruling but that the department had not decided whether to appeal. Roy R. Heimburger, chief executive of Blue Cross and Blue Shield of Missouri, said in a statement Monday: "The creation of RightChoice Managed Care was fully within the letter and spirit of the law governing nonprofit health services corporations." Heimburger said his company looks forward to working with the Insurance Department "in a new spirit guided by both the letter and intent of the Missouri law." Blue Cross and RightChoice together insure or administer the health policies of some 1.8 million people, mostly in Missouri. Blue Cross owns 80 percent of RightChoice stock. The remaining 20 percent trades on the New York Stock Exchange. Blue Cross still exists as a nonprofit entity, keeping about $90 million in insurance business, mostly for coverage of federal employees in Missouri. The question of profit status is important in the RightChoice case because Missouri's nonprofit laws require that a nonprofit converting to for-profit status put its assets in a foundation or other community benefit entity. Experts and even state regulators disagree about how much in assets is at stake - although estimates of around $500 million seem most common. "This has huge ramifications," said Joel Ferber, a lawyer representing one consumer group and six people who filed briefs against Blue Cross. "I don't think this is very good for the people of Missouri." Ferber said the ruling calls into question what happens when nonprofit health entities turn to for-profit purposes. …