Contentious Blue Cross NC bill sails through legislature

Contentious Blue Cross NC bill sails through legislature

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By Rose Hoban

A bill that would allow the state’s largest health insurer to restructure its corporate model has progressed quickly through North Carolina House of Representatives committees over the past two days, and it appears to be sailing toward becoming law.

House Bill 346 would give Blue Cross Blue Shield of North Carolina the leeway to create a nonprofit holding company that would become a parent to the 90-year-old insurance company and to any of Blue Cross NC’s current and future subsidiaries. 

A bone of contention around the bill is that it would allow Blue Cross NC to move some of its $4.6 billion surplus into the new holding company, which could then use that money to buy health care companies and other kinds of subsidiaries, as well as make investments that are subject to far less regulatory oversight than the insurer receives now.

In a series of committee hearings this week, the bill received, all told, less than a half hour of discussion. No public comment was solicited, and there was little of the contentious back-and-forth questioning that sometimes occurs in committee debate.

The swift movement of the bill speaks to the power of Blue Cross NC at the North Carolina General Assembly, where 14 lobbyists have worked hallways and lawmaker offices in an effort to secure passage of the controversial change. The company is a generous political donor, making at least $277,000 in donations in the 2022 election cycle. It also funded several “astroturf” advocacy organizations, or purportedly grassroots campaigns. 

“I just want to say as an insurance agent, and as a representative of Lenoir County, we have no other options” than Blue Cross NC, said Rep. Chris Humphrey (R-Kinston) during a House Insurance Committee meeting Wednesday afternoon. “Aetna and UnitedHealthcare, they’re not coming to Lenoir County because they can’t make money. Blue Cross has a mission to serve rural North Carolina.”

Humphrey stressed that he does not think adoption of the bill will cause health insurance premiums to rise, a stance that conflicts with that of state Insurance Commissioner Mike Causey — a Republican who has come out strongly against the proposal. 

Despite the contentiousness of the bill and the large sums at stake, HB 346 has breezed from committee to committee without allowing the state’s insurance commissioner as much input as he would like. Causey got only two minutes of rebuttal time on Tuesday.

‘Everything’s rushed right now’

The calendar has dictated the need for speed. May 4 is the legislative deadline known as crossover, when lawmakers work to get a bill passed in one chamber so it can stay alive for the rest of the legislative biennium. 

It’s a time of year when procedure can get loose, often giving short shrift to public input as multiple bills are jammed into a short time

“Sounds like the week before crossover to me,” NC Medical Society head Chip Baggett said with a laugh. “You and I both know that we’ve written laws on the back of napkins and passed them into rooms moments before it passed.

“I think everything’s rushed right now.” 

That was the case on Tuesday morning, when the bill was heard in the House Health Committee. Only 10 minutes were allotted for discussion. The primary sponsor, Rep. John Bradford (R-Cornelius), spoke for eight of those minutes, even after committee chair Rep. Larry Potts (R-Lexington) alerted him that he needed to speed up or there would be no time for a vote. 

“We need to modernize regulations that are decades old and only apply to [hospital service corporations] especially like Blue Cross and Blue Shield, which is our only not-for-profit of the two HSCs … based in North Carolina,” Bradford argued. 

The other hospital service corporation in North Carolina is Delta Dental, which has not been involved in discussions at the legislature. According to Causey, Delta Dental did not ask for the bill and has provided no input. 

Bradford’s lengthy explanation left only two minutes for Causey to give his rebuttal.

“This is not Blue Cross’s money, this is the people’s money,” Causey retorted. “Your mother, your grandmother, your family members, the mom and pop stores that pay all this money to Blue Cross, it’s their money.” 

Causey’s objection is based on a statute that requires Blue Cross NC to create a foundation with the company’s assets if it were to make a conversion to a for-profit entity. Those assets run into the billions, and such a foundation would have the potential to provide support to health care entities in many struggling rural communities. 

But Causey believes that if Blue Cross NC were to create such a holding, there would be no need to ever make the for-profit conversion, thus depriving the state, especially rural areas, of a valuable potential asset. 

Causey reiterated that he believed the bill would raise insurance premiums. He also objected to a lack of transparency and accountability for the new holding company, which would not be subject to regulation by the Department of Insurance. 

“If they pass this bill, they can move a billion dollars or $2 billion or $3 billion over to that holding company, shell company with no oversight,” Causey told the committee. “That’s wrong.”

The bill passed the health committee on a voice vote that included yeses and nos with little difference in volume. Committee chair Rep. Wayne Sasser (R-Albemarle) declared the bill passed without specifying specific vote numbers  and quickly adjourned. 

“A little bit more oversight”

Causey was in the room Wednesday for a hearing of the House Insurance Committee. He tried to sway lawmakers toward his viewpoint before the meeting started. He told NC Health News that some of the many sponsors who had initially signed onto the bill had taken their names off of it. 

But chairman Rep. Mitch Setzer (R-Catawba) announced at the start of the hearing that there would be no public input. That silenced Causey, who sat apart from lawmakers.

shows a white man in a red tie standing behind a podium. behind him is a screen with the words Department of Insurance projected on it.
Insurance Commissioner Mike Causey has come out strongly against the Blue Cross NC proposal to restructure the company. Credit: Rose Hoban

During that hearing, Democratic Rep. Terry Brown (D-Charlotte) rolled out an amendment that he said deals with some of the transparency issues the insurance commissioner has raised. 

“We’re making sure the process is a little bit more transparent, you’re able to make sure that we can track that and give a little bit more oversight in the process,” Brown said, before a vote approving the amendment. 

The changes in the amendment include limiting the sum that Blue Cross NC can transfer to the holding company to 25 percent of the total assets of the insurance company. The holding company would also be required to submit annual salaries of the 10 highest-paid employees to the insurance commissioner. And if a conversion to a for-profit company were ever to take place, the assets placed into a foundation would be the total value of the holding company and all subsidiaries, not just the insurance subsidiary.

Causey said he was unimpressed, but because he was unable to speak out, was limited to making comments to reporters sitting nearby.

The compressed timeline of the bill also perturbed Rep. George Cleveland (R-Jacksonville), who said that he felt the timing was “odd.” 

“I don’t think the motive behind it is genuine,” he said. “I believe that it’s something we shouldn’t be doing at this time.”

Other members spoke in favor of the bill, including Rep. Donny Lambeth (R-Winston-Salem) who had earlier expressed skepticism. 

“I’ve worked with Blue Cross for a long, long time [in the] health care field. I don’t always agree with them, they don’t always agree with me. They’re sometimes critical of me, sometimes I’m critical of them,” Lambeth said. “And that’s appropriate, because I think it makes all of us better when we challenge, sometimes, each other. 

He also said he didn’t believe the bill would cause premiums to rise. 

“I think if we can get Blue Cross an organizational advantage to be a fair partner across North Carolina, I think we oughta do it,” Lambeth said. “I think the concerns here are we just don’t know everything that might be coming down the pike at some point.”

After a 14-minute discussion, Cleveland was the sole “no” vote.

Afterward, Causey expressed frustration that, as the head of a state agency that regulated the subject area being discussed, he was silenced. 

“I’ve never seen that in my lifetime,” Causey said. “I never saw it happen. And I think they just wanted to shut me up and not hear any opposition.”

Causey said he’d keep talking to House members before the bill heads to the full chamber for a vote. 

“There’s a tremendous amount of political pressure for everybody to just shut up and vote ‘the right way,’ and that’s to me that’s wrong,” Causey said. “People should be able to vote their conscience and vote for the good of their individual districts, not because this is what some group wants.”

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