Changes could be on the way for one of the
state’s largest employers and political donors.
Florida Blue wants to restructure itself.
However, the health insurance giant has its
critics that warn the move could create a conflict between turning a profit and
the obligation to provide low-cost insurance to four million policy holders.
The Office of Insurance Regulation will
hold a public hearing Thursday night in Miami on Florida Blue’s bid
to switch from a not-for-profit mutual insurance company to a not-for-profit
mutual insurance holding company. Florida Blue is a political
powerhouse with nearly $5 million in campaign contributions during the 2012
election, including $2.4 million to the Republican Party of Florida and
nearly $700K to the Florida Democratic Party, according to state
campaign finance reports. The Jacksonville-based company employees 9,500
in Florida.
CEO Pat Geraghty says the move will
allow Florida Blue to expand its assets outside the insurance industry.
For example, Florida Blue currently has 11 retail centers around the
state where customers can purchase insurance, ask about a claim or get their
blood pressure checked. Those retail centers will likely get more traffic
because of the Affordable Care Act’s provision requiring individuals to
purchase health insurance. Florida Blue wants to capitalize on that
business, selling vitamins, fitness gear and other non-insurance related items,
Geraghty said.
“It really is about financial flexibility
and making sure in this time of great change for the health care industry that
we’re positioned in a way that’s most supportive of taking care of our
customers for the long run,” he said in a phone interview with The Associated
Press.
But critics say the switch to becoming a
mutual insurance holding company is just a bid to become a publicly traded
company and boost executives’ pay. Florida Blue is currently an
independent licensee of the Blue Cross Blue Shield Association.
“Mutual insurance holding companies create
a shell, a parent company, that doesn’t do any business. It doesn’t issue
insurance anymore. The only reason it exists is so the shareholder cannot
control the corporation,” said Brendan Bridgeland, director of the Massachusetts-based
Center For Insurance Research.
As long as that shell company is at the
top, it gives management a majority control of the voting power, he said.
The New York Assembly Standing Committee on
Insurance called the concept “fundamentally flawed” in a 1998 report.
The Florida Alliance for Retired
Americans cited that report when it spoke out against Florida Blue’s
proposed reorganization on Thursday.
Geraghty said consumers will be “absolutely
protected” under the new structure and will still have the same policyholder
rights they currently have, including the ability to vote on key issues.
He stressed the stocks will not be publicly
traded but will be held by the mutual insurance holding company.
It’s management nirvana
really. It gives them the ability to issue stock through a subsidiary holding
company, which means you can start giving yourself stock awards, stock options
that you can cash in but you avoid the problem of having to answer to
shareholders,” said Bridgeland.
Opponents said the company could transfer
$1.6 billion in surplus to a for-profit entity and that money would be
available to give to company executives and outside investors if stock
goes public, according to a lengthy statement from Florida Alliance for
Retired Americans.
“The result of such a stock issuance would
be crippling conflicts of interest between the interests of the policyholders
(who want lower cost health insurance) versus the new outside investors,” the
organization said.
Lawmakers this year passed a last-minute
amendment to allow mutual holding companies like Florida Blue to acquire
not-for-profit subsidiaries. Previously, such companies had only been allowed
to own for-profit subsidiaries.
“This was an amendment that never really
got a chance for public debate. It looked like a pretty shrewd lobbying effort
that got that amendment on,” said Ben Wilcox, research director for the
independent government watchdog group Integrity Florida.
But Florida Blue said the
amendment was not needed for the reorganization and noted it passed unanimously
in the House and Senate.
The Florida Times-Union reported
the state’s top insurance regulator originally opposed the move amid concerns
the restructure “may not adequately protect the interests of the policyholders.”
A spokeswoman for the Office of Insurance
Regulation said the commissioner had not made any decision yet.
When asked about the
commissioner’s original concern, Geraghty said “there was some confusion as the
process started.” He added, “I think today there is support for what we’re
trying to do.”
CBSMiami/AP
No comments:
Post a Comment