Howard Dean Platform RE Health Insurance Conversion
From Jim Reed
of the Dean Campaign:HOWARD DEAN'S PLATFORM TO LIMIT THE IMPACT OF REQUESTS FOR CONVERSION OF NONPROFIT HEALTH INSURANCE PLANS ON PREMIUM PRICE AND SCOPE OF COVERAGE. Howard Dean wants all Americans to have high quality, affordable health insurance, and supports appropriate roles for both public and private health insurance plans. Private, nonprofit health insurance offers an important option for maintaining private sector participation in the health insurance industry, while meeting the goal of guaranteeing high quality health insurance to every American and their families. Nonprofit plans are particularly important for persons who have pre- existing conditions that involve more expensive medication or procedures. However, conversions of private plans that are currently nonprofit, to for-profit, investor-owned companies, potentially permit shareholder interests to compete with basic health care coverage interests of policyholders. As President, Howard Dean will support the continued existence of traditionally private, nonprofit insurance plans, by opposing unnecessary conversions to investor-ownership.
PROBLEM: HOWARD DEAN BELIEVES THAT AMERICANS SHOULD RESPOND WITH APPROPRIATE CAUTION TO THE RECENT TREND OF CONVERSIONS OF PRIVATE, NONPROFIT PLANS TO FOR-PROFIT, INVESTOR-OWNED INSURANCE COMPANIES. There are many examples of successful, private, nonprofit health insurance plans: one is the national network of Blue Cross and Blue Shield (BCBS) plans. "The traditional BCBS nonprofit mission to serve the local community .... includes assuring that as many people as possible have access to affordable, high- quality health care and that the company's earnings are reinvested for subscribers' benefit rather than distributed to shareholders." (Center for Studying Health System Change, "Blue Cross Blue Shield Conversions and Mergers Likely to Continue," January 29, 2004, p.3). Blue Cross Blue Shield Association (BCBSA) plans cover 84.7 million Americans, or approximately one in four, and collectively paid $111 billion in claims in 2000. (Source: Blue Cross Blue Shield Association, "Who We Are: Understanding the Blue Cross System," 2004). The BCBS network has a history of being based locally and operating on a nonprofit basis, but "the 1994 decision by the BCBS Association, which licenses the use of BCBS trademarks, to allow for-profit organizations to hold primary BCBS licenses set in motion a chain of for-profit conversions and mergers among Blue plans across state lines. While only four of the 41 independent Blue plans are for-profit, these plans operate subsidiaries in 14 states and Puerto Rico and cover more than a quarter of BCBS enrollees." ("For-Profit Conversions and Merger Trends Among Blue Cross Blue Shield Health Plans," Id., pp. 1-2).
THIS CONVERSION TREND OF PRIVATE, NONPROFIT TO FOR-PROFIT, SHAREHOLDER-OWNED COMPANIES, IS LIKELY TO CONTINUE. "Recent regulatory setbacks have slowed the pace of for-profit conversions and mergers among Blue Cross and Blue Shield health plans, but the trend is likely to resume among the Blues as plans adapt conversion strategies...." ("For-profit Conversions and Merger Trends Among Blue Cross Blue Shield Health Plans," Id. , p.2). The current political environment will make the continuance of this trend likely: "the experience in the late 1990s suggests that the pace of conversion and consolidation is likely to pick up again with changes in the political and regulatory environment-such as turnover of elected officials-along with revised conversion strategies on the part of plans as they identify ways to satisfy regulators' concerns." (Id., p.5.)
NONPROFIT CONVERSIONS TO FOR-PROFIT, INVESTOR-OWNERSHIP, PRESENT POTENTIAL CHALLENGES TO KEEPING PREMIUMS LOW, AND MAINTAINING INSURANCE COVERAGE POLICIES DEDICATED EXCLUSIVELY TO PUBLIC, AS OPPOSED TO SHAREHOLDER, INTERESTS. Advocates for maintaining the availability of private, but nonprofit insurance plans, include even representatives of the Blue Cross Blue Shield network. "Not all senior BCBS executives favor conversions and mergers. Management at most of the nine nonprofit plans in the 12 communities [studied by the authors] believe that they can compete effectively and maintain financial viability without converting and merging." (Center for Studying Health System Change, "For-profit Conversions and Merger Trends Among Blue Cross Blue Shield Health Plans," Issue Brief No. 76, January 2004, Grossman and Strunk, p. 4). "The CEOs of many of these plans also strongly prefer retaining the leadership control they have as heads of independent nonprofits. They do not have to respond to shareholders' demands for regular earnings growth in a cyclical business or defer to management of an out-of-state parent company." (Id., p.4). By no means should all private plans be nonprofit; but where particular plans have traditionally operated on a nonprofit basis, and received state and federal support in the process, state regulators should view a request for conversion with heightened scrutiny for its effect upon beneficiaries.
Howard Dean recognizes that Americans have a vested interest in the outcome of these conversion applications, both in preserving high quality, affordable, private sector health insurance, and in protecting longtime state investments in nonprofit insurance programs through previous tax incentives and other protections afforded non- profit enterprises serving the public. At a 1999 State Insurance Department hearing, New York Attorney General Eliot Spitzer explained the concerns over a proposed conversion of the not-for-profit medical care insurer Empire Blue Cross and Blue Shield into a for-profit, publicly traded corporation. "Spitzer ... emphasized that the people of New York have a deep interest in the future of Empire, having supported the not-for-profit health plan for more than six decades through tax exemptions, discounted hospital rates and other public subsidies granted by the state and federal governments. This gives New Yorkers a legally protected interest in the current value of Empire which must be safeguarded in any conversion." (Press Release: Office of New York Attorney General Eliot Spitzer, "Spitzer Airs Concerns On Blue Cross/Blue Shield Conversion: Legal Prohibitions and Public Trust at Issue."). Howard Dean understands that Americans have a financial and legal right to object to nonprofit plan conversions which diminish beneficiary protections.
PROPOSALS: HOWARD DEAN BELIEVES THAT PRIVATE, NONPROFIT HEALTH INSURANCE PLANS ARE ESSENTIAL TO MAINTAINING A HIGH QUALITY, PRIVATE SECTOR INSURANCE OPTION, ESPECIALLY FOR FAMILIES OF PART-TIME EMPLOYED WORKERS AND INDEPENDENT CONTRACTORS , AND FOR PERSONS WITH EXPENSIVE, PRE-EXISTING MEDICAL CONDITIONS.
As President, Howard Dean will encourage State Insurance Commissioners and the Internal Revenue Service to protect the maintenance of private, nonprofit health insurance plans, where called for by the circumstances of the plan conversion request and the policyholders' best interests. Recent efforts to prevent unnecessary, profit- motivated conversions prove that an aggressive response by state insurance commissioners and state and federal legislators can preserve the traditional purpose of non- profit insurance plans: high quality, fair and affordable health care coverage. "Marking the first time a Blue plan conversion was rejected outright, the Kansas insurance commissioner denied BCBS of Kansas' proposal to convert and merge with Anthem in February 2002 because of concerns about higher health insurance premiums. Then, in March 2003, the Maryland insurance commissioner rejected Care First Inc.'s proposal to convert and merge with WellPoint because of concern, among other things, that the plan-the BCBS licensee for Maryland, Delaware and the Washington, D.C., area was undervalued and the transaction contained improper executive bonuses. Following these decisions, BCBS of North Carolina withdrew its conversion application, and Horizon BCBS of New Jersey, which had been expected to file an application, abandoned conversion activities." ("For- Profit Conversions and Merger Trends Among Blue Cross Blue Shield Health Plans," Id., pp.4-5). Howard Dean will encourage State Insurance Commissioners to review proposed conversions with particular attention to the needs of consumers, and will encourage the IRS to promote the non- profit status of private health insurance plans.
A Dean Administration also will institute an ongoing federal study of the effects upon consumers of the conversion of private, non-profit health insurance plans, to for-profit ones. Currently, more study is needed: "few studies of the impact of conversions and mergers on consumers have been available to guide regulators' decisions. Most conversions and mergers have not been in place long enough to assess their effects, and there is little reliable data to permit analysis." ("For-Profit Conversions and Merger Trends Among Blue Cross Blue Shield Health Plans," Id., p.7). Greater predictability of the effect of nonprofit conversions will permit state insurance regulators and federal policy-makers to render decisions that best protect plan beneficiaries. Likewise, more information will allow political leaders like Howard Dean to support appropriate state responses to proposed conversions, over the objections of those insurance executives and legislators who would place profit ahead of effective health care delivery for Americans.
A Dean Administration will study the effects of health insurance plan conversion from private, nonprofit companies to for-profit ones, and use the power and voice of the federal government to oppose and reduce those conversions where they appear likely to raise premium prices or decrease benefits. As part of his Presidential health care agenda, Howard Dean will preserve an effective role of the private sector in health insurance delivery, by preserving private, nonprofit health care coverage options for Americans and their families.
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