Blue Cross reform bill easily clears NC legislature

A bill to give the state’s largest insurer new flexibility to buy other companies without seeking state regulators’ approval passed the General Assembly Tuesday with broad, bipartisan support.

House Bill 346 is a top priority for Blue Cross Blue Shield of North Carolina, which says it needs to restructure to stay competitive in an evolving health insurance industry. It would let the nonprofit company kick hundreds of millions of dollars up to a newly created holding company that would be further from regulators’ reach.

That holding company, also a nonprofit, could use money that the regulated insurance company generates to invest in other health care firms and related companies — a prospect that has raised suspicions for some.

The measure cleared the state Senate 41-5 and heads to Gov. Roy Cooper, who can sign it into law. Cooper’s office would only say Tuesday that he will review the bill.

The bill moved quickly despite pushback from state insurance commissioner Mike Causey, who vehemently opposed it, as well as a call for changes from Attorney General Josh Stein and a last-minute push from state treasurer Dale Folwell to delay passage.

There was no debate Tuesday on the Senate floor, and the complex measure passed in moments.

Causey and others say the bill ultimately could allow higher insurance premiums and that it represents an end-around past a law the state passed in the late 1990s that was meant to keep Blue Cross from turning into a for-profit company without also creating a multibillion-dollar charitable trust. The company says it needs these changes to move faster on purchases, which currently require approval from Causey’s office or Stein’s.

Large for-profit competitors don’t have to wait for those approvals, and many General Assembly members see the bill as a way to help one of the state’s most venerable companies, which also happens to be one of the state’s larger campaign donors through its political action committee, stay competitive.

Through a spokeswoman Tuesday, the company thanked lawmakers “for advancing solutions to help improve health care access and make care more affordable for all North Carolinians.”

“This bipartisan bill — which has been endorsed by many of North Carolina’s leading nonprofits and business organizations — would allow Blue Cross NC to remain a state-based, not-for-profit, mission driven company and build on our state’s strong business climate,” spokeswoman Sara Lang said in an email.

The changes in the bill would take effect immediately. Lang said past Blue Cross investments “demonstrate the type of work we will do with this flexibility." She pointed to investments in substance abuse treatment centers and back-office support for primary care doctors as examples.

“These efforts have helped deliver better and more affordable health care, and we want to continue to build on these results for North Carolina consumers,” Lange said in a statement.

Folwell said before Tuesday’s vote that Blue Cross’ huge market share in North Carolina helped it build up “billions of dollars of reserves that rightfully belong to policy holders who have been punished for decades with higher premiums and declining customer service.”

Folwell’s office oversees the State Health Plan for state employees, teachers and retirees, which early this year announced plans to drop Blue Cross in favor of Aetna, a major competitor. He said in a statement that oversight and consumer protection “are even more pressing now given that Blue Cross Blue Shield always faces the possibility of losing more large customers.”

Bill sponsors have pushed back repeatedly against criticisms and suspicions surrounding the bill, calling it a needed reform for a North Carolina company and the only health insurer active in all 100 North Carolina counties.

“Blue Cross is operating at a disadvantage in the market,” Senate Republican leader Phil Berger said after the Senate vote. “And the main reason I’m supportive of the bill is I think it helps level the playing field.”

Sen. Graig Meyer, D-Orange was one of the 'no' votes Tuesday. He said the bill needed more rules governing how Blue Cross can move money from its regulated insurance company over to this new holding company.

“BCBS is in the public trust,” Meyer said. “People pay a lot of money for their insurance. We need some more guardrails on what they do with the reserve funding they have accumulated from people’s premiums so that it can’t be turned into private profits.”