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North Carolina legislature passes insurance bill allowing Blue Cross to reorganize

Blue Cross and Blue Shield of North Carolina main campus in Durham.
Blue Cross and Blue Shield of North Carolina main campus in Durham.

The North Carolina legislature gave final approval Tuesday to a bill allowing the state's leading health insurance provider to restructure despite criticisms from the state insurance commissioner that it would erode his regulatory authority and undermine his ability to protect consumers.

The measure, which permits Blue Cross and Blue Shield of North Carolina and a dental insurance provider to transfer assets into a parent holding company, cleared the Senate 41-5 Tuesday after passing the House with similar bipartisan support earlier this year.

Shepherded through the legislature by Republicans and one top Democrat, the bill now heads to the desk of Democratic Gov. Roy Cooper, who will review the legislation, a spokesperson said.

If Cooper signs the bill or lets it become law without his signature, Blue Cross and Delta Dental will be able to move money, property and other investments from their existing hospital service companies to new shell companies run by the same executive leadership. They could, for example, use those assets to purchase other companies and expand their services.

The changes would take effect as soon as it becomes law.

"At the present time, Blue Cross is operating at a disadvantage in the market," Senate leader Phil Berger said Tuesday after the vote. "And the main reason I'm supportive of the bill is because I think it helps level the playing field and allows them to compete on an even plane with other health care insurance providers."

While Blue Cross, a fully taxed nonprofit, says the reorganization would give it more flexibility to behave like its for-profit competitors, state Insurance Commissioner Mike Causey argues his department would not have ample oversight to make sure the holding company acts in the best interest of consumers.

The bill includes provisions requiring the holding company to invest in entities that promote affordability or "contribute to the health needs of North Carolina residents." It also caps the amount of "admitted assets" the insurer can transfer to the holding company at 25%.

The holding company also would have to file annual audited financial statements with Causey's office, disclose compensation for its highest-paid executives and reveal its "strategic investment activities."

But Causey, a Republican, said the bill gives Blue Cross "tremendous leeway" to use money that he said belongs to North Carolina ratepayers for its own self-interest.

"I have no ability to hold them accountable on what they do with the holding company once that money is taken out of Blue Cross the insurance company," Causey told The Associated Press after the vote. "We can only hope that the consumers will not be harmed."

Before the vote, Sen. Todd Johnson, a Union County Republican and bill sponsor, assured fellow senators that the bill included "90% of what the commissioner of insurance was asking for."

But Causey told the AP later Tuesday, "It's maybe closer to 10%, but very little."

Blue Cross spokesperson Sara Lang applauded the legislature for passing a bipartisan bill that she said would "help improve health care access" and "build on our state's strong business climate."

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