Horizon Corporate Reform Bill Taken Off Fast Track, Public Hearings Likely in 2020

Lilo H. Stainton | December 11, 2019 | Health Care
Assembly sponsor of enabling legislation says he is happy to allow for further discussion and public hearings
Credit: Twitter; johnfmckeon.com
Assemblyman John McKeon is sponsor of the enabling legislation. Sen. Nellie Pou will be sponsoring a companion version of the reform bill in the Senate.

State officials are pumping the brakes on a controversial proposal that would allow New Jersey’s largest health insurance company to transform its corporate structure in ways supporters say are necessary to remain financially competitive and protect patient care.

Assemblyman John McKeon (D-Union) said Tuesday he is open to delaying legislative action until early next year on a bill he proposed that would enable Horizon Blue Cross Blue Shield to evolve from a charity into a nonprofit mutual holding company; that, he said, would allow for further discussion and public hearings in different parts of the state. McKeon also said he met with health care advocates for over an hour last week on the issue, and is willing to consider amendments to expand consumer protections they felt were missing in the draft version of the proposal unveiled two weeks ago.

“We want to make sure everyone’s points are thoughtfully considered,” said McKeon, chair of the committee that regulates insurance companies. He said he has been working with Assembly leadership on a strategy for the new legislative session, which begins in mid-January; a companion version of the reform bill will be sponsored by Sen. Nellie Pou (D-Passaic), who leads the legislative panel charged with insurance oversight in her house.

“Lots of people have been working on this for more than a year,” McKeon said, acknowledging that Horizon attorneys’ — and other experts — assisted with the drafting process. But he said the bill couldn’t be technically introduced until lawmakers returned to Trenton in November, following the campaign season, for the final few months of the two-year legislative session.

“This wasn’t about any election, it’s much bigger than that,” McKeon said, pushing back on suggestions that it was announced during the so-called lame-duck period to avoid public scrutiny.

The proposal also has raised concerns for senior officials in Gov. Phil Murphy’s office who suggest the legislation was drafted in relative secrecy and without sufficient stakeholder input. In addition, if it is implemented, they fear Horizon could eventually be sold as a for-profit company without setting aside a percentage of its assets to support public health, as is required under current state law — an issue health care advocates also flagged last week. The 87-year-old company operates under a unique state statute that requires it work to benefit those it insures.

Roadblocks in Horizon’s way

These roadblocks arose as Horizon — which insures some 3.4 million New Jerseyans and employs more than 5,000 — rolled out a multipronged campaign to support the legal change, which it says would allow the company to invest more in new technologies like wearable health devices, better use data to improve quality and control costs, and modernize its business.

In the last two weeks Horizon, based in Newark, has launched television ads, distributed glossy mailers and created a new website devoted to the “Move Health Care Forward” campaign to revise a law the company said puts it at a serious disadvantage in today’s health insurance  market.

On Friday, a public relations company announced the creation of a tax-exempt organization under that same name dedicated to “educating the public about the benefits of creating a (state) process” to allow Horizon to reform its governance structure and improve corporate flexibility. The insurance company declined to say Tuesday what it has invested in this effort so far.

“New Jerseyans expect more convenient, affordable and quality health care,” said Dennis Bone, president of the Move Health Care Forward campaign; Bone, a former Verizon CEO, is one of three high-profile leaders tapped to head the initiative. “New Jersey’s outdated health care laws, however, have made it more difficult to meet consumer expectations. But by making simple changes to the law we can expand access to quality, affordable health care for millions of New Jerseyans, including seniors and underserved residents.”

According to draft text of McKeon’s bill, the legislation would create a process under the state Department of Banking and Insurance through which Horizon could convert from its current status as a not-for-profit “health services corporation” into a mutual holding company. It also calls for the company to pay the state Treasury up to $1 billion over seven years, in part to offset tax losses estimated to reach $50 million annually.

“They’re in good financial shape right now and that’s the best time to allow for this type of change,” McKeon said. If the structure remains the same, they run the risk of becoming a “dinosaur” in the current health insurance landscape, he added. Senate President Steve Sweeney (D-Gloucester) also endorsed the plan.

Skeptical observers

But a group of health care advocates said last week that McKeon’s bill is just an attempt to overhaul the company — which they suggested is worth as much as $10 billion — without making the public health-related “charitable trust payment” or undergoing the government review required by current statute. These concerns are now shared by senior officials in the governor’s office, who fear the proposed reform plan could result in Horizon being sold as a for-profit entity to benefit insurance executives, not policyholders.

Horizon spokesman Tom Vincz said that while a for-profit sale is possible, the public would still be protected and the state would have access to a portion of the company’s assets. “The draft legislation makes clear Horizon’s commitment to ensuring that the full value of the company, whether it be in its current form or as a mutual holding company, be preserved and included in any proceeds resulting from a for-profit conversion,” he said.

Recent history has made the health care advocates gun-shy when it comes to reforming Horizon, however. The past two decades have involved a half-dozen attempts — championed by corporate leaders, lawmakers and at least one governor — to convert the insurance giant into a for-profit company. During a state budget standoff in June 2017, former Gov. Chris Christie pledged his support for this change in return for an estimated $300 million annual payment from the company to support public anti-addiction work.

Murphy officials said they opposed this concept when he was campaigning for governor in 2017 and again when a similar deal was discussed earlier this year, as part of negotiations with lawmakers to craft the current state budget. Others note that a bill similar to McKeon’s proposal was circulated in June 2019 as part of a legislative effort to identify new revenue sources to help fund pet projects.

Vincz, with Horizon, said the company appreciated McKeon’s “leadership and commitment” to its reform goals and pledged to continue working with the sponsors, administrative officials and other stakeholders “to advance this legislation that will ultimately provide Horizon the operational flexibility to expand investment in innovations that improve health care quality, affordability and the member experience.”

“Horizon’s sense of urgency is simply a reflection of what we’re hearing from our members and their need for a health care experience that is more connected, convenient and affordable,” he said.