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Horizon Reorganization Bill Gains Committee Approval

Trenton – Legislation that would allow for the reorganization of Horizon Blue Cross-Blue Shield was approved by the Senate Commerce Committee today.

The bill, S-3218, sponsored by Senator Nellie Pou, Senator Paul Sarlo and Senate President Steve Sweeney, would give the state’s largest health insurer the ability to move forward with reforms that will help keep premiums down and compete in the rapidly-changing healthcare marketplace.

Horizon would continue to operate as a not-for-profit, converting from a not-for-profit health services corporation to a not-for-profit mutual holding company owned by its members.

The legislation would explicitly prevent Horizon from merging with another insurer or converting to a for-profit company without legislative approval.

“These reforms will enable New Jersey’s only not-for-profit health insurer to modernize the way it is organized so it can compete in the rapidly-evolving healthcare market,” said Senator Pou (D-Passaic/Bergen), who chairs the Commerce Committee. “As a not-for-profit mutual, Horizon will have the ability to engage in new partnerships that deliver more convenient care, provide additional tools to medical professionals and improve access to a broader array of services. The company will be able to enhance services in a variety of ways, including actions that can reduce out-of-pocket costs and expand telemedicine, among other improvements.”

“Horizon needs greater flexibility in investments and innovation to bring more affordable and accessible products to its members,” said Senator Sarlo (D-Bergen/Passaic), the chairman of the Senate Budget Committee. “It will continue its mission as a charitable and benevolent institution, using its assets and revenues as a non-profit organization, but it will be able to adapt to the marketplace. The change will allow Horizon to promote innovation and provide more diverse services.”

“Horizon has a unique role and responsibility that needs to be protected and sustained with a reorganization that allows the insurer to adapt to the modern healthcare marketplace,” said Senator Sweeney (D-Gloucester/Salem/Cumberland). “This bill will allow for changes, but prevents the company from abandoning its obligations to its policyholders and its responsibility to the people of New Jersey.”

The legislation includes annual payments to the state totaling $1.25 billion over 18 years, including an initial contribution of $600 million.

By transitioning to a non-profit mutual holding company structure, Horizon will be able to maintain its non-profit status, while gaining the flexibility it needs to invest in new technologies, modernize care delivery and pharmaceutical benefits, and offer additional services such as dental plans, vision plans, student insurance and Medicare Advantage.

The reorganization would allow Horizon to pursue the acquisitions of providers, pharmacy benefit managers and other businesses to expand and enhance healthcare services for its members.

Before any reorganization could happen, Horizon would have to submit an application to the Commissioner of Banking and Insurance, who would review the plan to determine if it is financially sound and protects the interests of policyholders. During the process, the commissioner could hire expert consultants, at Horizon’s expense, and hold hearings on the proposal. The commissioner would continue to have regulatory oversight.

The reforms would increase public oversight with the board having a total of 22 directors, including nine appointed by state officials; five by the Governor, two by the Senate President and two by the Assembly Speaker.

A recent study found that restructuring Horizon as a non-profit mutual holding company would create $4.16 billion in additional economic output, create about 2,000 full-time jobs and generate about $1.9 billion in new wages and benefits over the next decade.

Horizon would continue to operate the Horizon Foundation for New Jersey, which has provided more than $53 million in grants to improve healthcare.

In recent years, 13 Blue Cross plans in 18 states have converted to a mutual structure. In 16 of the 18 states, the mutual operates as a non-profit.

The committee vote was 3-1-1. The bill will go to the Senate Budget Committee for a hearing tomorrow.