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Blue Notes

7 Reasons to Worry About a For-Profit Blue Cross

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Bob Greczyn doesn't look like a corporate shark. Seated behind a conference table in his Chapel Hill offices, the CEO of Blue Cross and Blue Shield of North Carolina exudes more of the folksy charm of a family doctor than the traditional reserve of a business executive. His jacket is off, his blue-eyed gaze is direct and a frequent smile flashes beneath a silvery, Captain Kangaroo-style mustache.

Discussing the potential conversion of his company from nonprofit to for-profit status, Greczyn's tone is firm, but soothing. The change will mean long-term stability for Blue Cross, he says, by allowing the insurer to raise needed capital on the stock market to keep up with for-profit competitors. Under the requirements of state law, it also will mean creation of a foundation with a potential $3 billion in assets dedicated to the health-care needs of North Carolinians.

Greczyn says Blue needs to go for-profit in order to survive over the long haul. Company finances are healthy--for now, he says. "But conversion is not about what will happen to this company this year or next. It's about a long-term vision. This is a unique opportunity to help secure the future of a health insurer that's based here. And to create a foundation to help needy citizens."

If only it were that simple. But a look at conversions of Blue Cross plans in other states offer scenarios that aren't quite so rosy. Take Virginia for example. In 1997, Virginia's Blue Cross converted to a for-profit called Trigon and put $175 million in a state-run trust fund as repayment for the value created during its years as a nonprofit. This past July, Indiana-based Anthem Inc.--a company that's been gobbling up Blue Cross organizations across the country--purchased Trigon for $4.2 billion. The loss of public assets in the deal? A whopping $4.1 billion.

In New York, the governor negotiated secretly, then pushed through a bill in January that allows him to funnel 95 percent of the $950 million proceeds from the nonprofit conversion of Empire Blue Cross and Blue Shield to salary increases for health-care workers. Consumer groups are suing over what they see as an unlawful diversion of those funds from the purposes of the original nonprofit: expanding access to health care for needy citizens.

So far, health care hasn't been the focus of debate over a for-profit Blue in North Carolina. Those issues have been subsumed by discussions about the foundation. With even many critics of Blue dazzled by the chance to create a $3 billion charitable organization, the burden of making a case has subtly shifted from the company to state regulators and health activists, whom Blue Cross supporters blame for delays in the process.

The most burning questions about a Blue Cross conversion, such as whether it will raise rates or result in huge bonuses for executives, are hard to answer because details are contained in confidential business files still being reviewed by regulators. But a look at Blue's history, its current business practices and its relations with consumers and providers--as well as the record on conversions in other states--raises some serious red flags. Among them are:

* No meaningful guarantees that conversion won't result in a sale to an out-of-state buyer

* A steady decline in the number of people enrolled in Blue's subsidized coverage for the hard-to-ensure

* A continuing rise in premium rates paid by consumers while Blue's profits are also rising

* Fears that the resources of the new foundation won't be equal to the public investment made in Blue Cross over the years.

Protecting the public trust has been a rallying cry for North Carolina consumers since well before Blue Cross filed an application to go for-profit in January. Four years ago, a coalition of health-care and nonprofit leaders banded together to defeat legislation that would have allowed a conversion without repayment for the half-century of tax and premium-tax breaks Blue had enjoyed as a nonprofit. (Blue Cross still denies it had anything to do with the bill, though it did lobby hard for the measure's passage.)

After discovering the legislation was advancing quietly, members of the Coalition for the Public Trust crisscrossed the state, speaking up in town halls, churches and schools. They recruited support from the likes of former UNC president Bill Friday and former governor Terry Sanford for a tougher standard, and eventually won out as the legislature ditched the bill for a study commission and eventually passed a new conversion law.

National consumer activists cite North Carolina's law as among the strongest in the country. It requires that 100 percent of Blue Cross' assets at the time of conversion be transferred to a foundation dedicated to health care, and lays out a process by which state regulators and the public can weigh in on Blues' proposal. (See "Conversion Primer," pg. 26).

Grecyzn says Blue Cross wholeheartedly supports the 1998 law, which was passed the same year he joined the company. "Frankly, I'm glad we settled the argument at 100 percent of the assets," he says. "You can't do more than that. It's a settled issue."

Settling the issue of whether Blue should go for-profit is up to the state Department of Insurance (DOI) and the Attorney General's Office. Regulators are reviewing the company's conversion plan and have scheduled three public hearings starting today in locations across the state. (One in Raleigh will be held at 2 p.m. on Oct. 15 at the McKimmon Center.) Ideally, a decision is expected within a few weeks of those hearings.

But a potential wrench in the works is a dispute over how much control the foundation spawned by conversion should have in decisions affecting the value of a for-profit Blue. Blue Cross insists it must follow the rules set down by the national Blue Cross trade organization--rules that would bar the foundation from participating in key company business decisions. Coalition members and state regulators counter that unless the foundation can vote down a sweetheart sale or fat stock options for Blue's executives, public assets will be squandered.

Since March, state regulators and Blue Cross officials have fought a verbal tug of war, with the company alternately issuing ultimatums and proposing compromises. (The latest, filed by Blue on Sept. 30, sets a 12-month moratorium on executive stock options after conversion.) Grecyzn has said numerous times that Blue Cross will withdraw its application if agreement can't be reached on the scope of the new foundation's powers.

Last week, tensions reached a new high, with DOI officials refusing to give Blue assurances in advance of public hearings that the state would approve the new "voting trust agreement" for the foundation and would not restrict executive salaries or bonuses--among other issues. The company said the department had "mischaracterized" its requests for agreement and demanded an apology for creating the impression Blue was trying to bypass public hearings. By week's end, Blue's board had "confirmed" its intent to go ahead with the process, and board chair Rhone Sasser said Blue was looking forward to public hearings.

Wrangling over process issues has kept attention off the substance of Blue's conversion plan. Even many of those who've been actively involved in negotiations over the foundation are quick to emphasize that the first step is for regulators to decide whether a Blue Cross conversion is justified.

"The foundation is the carrot that shouldn't be created at the expense of other public benefits," says Shannon St. John, co-chair of the Coalition for the Public Trust and president of the Triangle Community Foundation.

Dawn Touzin, who's been tracking Blue Cross conversions for the Boston-based advocacy group Community Catalyst, says public debate has evolved since California's Blue first went for-profit in 1993. "The earlier battles were around what is the law and how much belongs to the public," Touzin says. "The next conversions were about struggling Blues. Now, we're looking at conversions of healthy Blues, so the question of what's in the public interest has shifted again."

Consumers aren't the least bit confused about where to fix their attention. Of the 500 public comments logged by the Department of Insurance, the vast majority are opposed to conversion for fear it will raise rates and reduce access to coverage for vulnerable groups. Blue Cross is already behaving like a for-profit, many of the e-mails and letters point out, by hiking premiums, trimming payments to doctors and dropping riskier groups. What will happen once the company's primary duty is to its shareholders, as opposed to its nonprofit mission? "If it's going to mean I've got to pay ever-increasing premiums, I'm leaning against," says Holly Springs resident Jimmy Cobb, one of numerous Blue Cross policyholders who've written to the DOI.

State regulators say those questions are uppermost in their minds as well. For answers, the DOI has commissioned a health impact study and is reviewing Blue Cross's confidential business plan, which includes rate forecasts, details about profit margins (and what that money's been used for) plans for small-group coverage and information on how the company reached the decision to go for-profit.

Absent that information, even critics of Blue say it's hard to know whether consumers would be better or worse off if the insurer converts. Still, in order to make the right decision they say, the spotlight should stay on health care.

"This could be a wonderful time for a Blue Cross organization to say, 'Hey, we're going to make a statement. We'll help create a whole new model for health-care delivery,'" says Jerry Bernstein, a founder of Raleigh Pediatric Associates, which recently re-upped with Blue Cross after dropping out of the network over disagreements about reimbursement rates and restrictions on patient care. "So far, they have not made that case."

How should citizens be evaluating the case Blue's been making? Here are seven key concerns:

1. Is conversion a prelude to selling Blue Cross to an out-of-state company?
Bob Greczyn is adamant on this one: "Our company is not for sale," he says. "Just because there are a couple of big ones [potential buyers] out there doesn't mean we would fall into their arms." Asked whether he'd make a moratorium on selling the company part of Blue's conversion plan, Greczyn is less resolute. "That's a decision my board of trustees would have to make," he says, and later, "I can't give a guarantee. That would be disingenuous."

There are no known offers on the table for North Carolina's Blue Cross. What is known is that industry giants such as Anthem have their eye on buying up plans in the Southeast. In other states, sales of Blues plans have been part and parcel of conversion blueprints. In Maryland, for example, CareFirst BlueCross BlueShield--the state's largest health insurer--wants to convert to a for-profit so it can be acquired by California's WellPoint Health Networks for $1.3 billion. In Colorado, leaders of that state's financially struggling Blue Cross put the company up for sale in the middle of regulatory hearings on its pre-conversion value. The state began negotiating with one of the buyers, Anthem, which eventually offered $155 million for Colorado's Blue.

Such wheeling and dealing is one reason the Coalition for the Public Trust has fought to ensure that a new foundation--as the initial major stockholder of a for-profit North Carolina Blue--has a say in major decisions such as a sale. "It comes down to, once Blue Cross is a private company, do the owners of that company have any control over corporate deals?" says coalition co-chair Martin Eakes, founder of the Center for Community Self Help in Durham.

Since the Blues' national association changed its rules in 1994 to allow member organizations to go for-profit, there's been what one scholar calls a "stampede" of sales, mergers and for-profit conversions. In the current health-care climate, experts say Blues' rising enrollments, sizeable surpluses and large market share make them prime targets for acquisition. (North Carolina's Blue had 24 percent of the market in 2001, "and nobody else touches that," says Chrissy Pearson, a spokeswoman for the DOI. "The second in line is 9.7 percent for United.")

So, despite Greczyn's assurances, many remain worried that a sale to an out-of-state buyer is on the horizon. "I think a sale is inevitable," says Robert Seligson, executive vice president and CEO of the North Carolina Medical Society. "Even though senior management says they don't want to sell, sometimes the economics of capitalism makes people change their minds."

If Blue is sold, the state will lose a health insurer with homegrown loyalties. "We've got real concerns about what that would mean," Seligson says. "Right now, Blue Cross is the only managed care plan that doesn't operate outside of North Carolina."

2. Is conversion a way for Blue Cross executives to enrich themselves at the expense of the public?
Nonprofits can't offer stock options--an increasingly popular way to compensate executives. So there's no question that conversion to a for-profit holds out potential benefits for Blue Cross officials. With many conversions tied to the sale of Blue Cross plans, there are also possibilities for bonuses and incentive pay as part of the changeover.

Once again, the record in other states is far from comforting. In Maryland, CareFirst Executives were promised incentive checks worth $33.2 million if the sale of their Blue Cross plan to WellPoint was successful. The legislature blocked those payments, but William Salganik, writing in The Baltimore Sun, reports that Blue executives still stand to pocket $48.9 million--including $18.9 million to CareFirst CEO William Jews--in deferred incentives, retirement and severance pay if the deal goes through.

The sale of Blue Cross plans has also been a windfall for executives at Anthem, the company that now owns nine national plans. Anthem's CEO, Larry Glasscock, saw his total compensation leap from $2.2 million in 2002 to $15.7 million last year. The bulk of that was a $12.4 million long-term cash bonus tied to the company's performance between 1998 and 2000.

North Carolina's conversion law offers protections against Enron-style executive payoffs by barring Blue Cross' directors, officers and employees from receiving any "distribution of the assets, surplus, capital or capital stock of the new corporation as part of conversion." Blue's recent agreement to hold off on a stock option plan for 12 months following conversion is a good faith gesture in the same direction--though it appears to have been made under pressure. In a statement announcing the agreement, Blue was quick to note that it has not proposed a stock plan for its officials: "This change was requested by regulators."

Salaries for Blue Cross executives haven't exactly been suffering under the company's current structure. Annual financial statements on file at the DOI show Greczyn's salary rose from $353,303 in 1999 to $516,154 last year (he points out that he was promoted to the company's top post during this period). When bonuses and other compensation is figured in, Greczyn's total package rose from $411,656 in 1999 to $1.12 million in 2001. Retired company President Ken Otis saw his compensation upped from $747,464 in 1999 to $1.07 million in 2001.

Those figures, though high by nonprofit standards, are in line with salaries and bonuses paid to Blue Cross executives in some other states, including Maryland. North Carolina Insurance Department officials say executive salaries are among the items in Blue's confidential business plan that are under the microscope.

3. Will conversion lead to higher insurance rates?
Blue Cross policyholders are especially worried about this one because of steady increases in premiums, co-pays and deductibles over the past several years. And things don't seem to be turning around. In July, the DOI approved a rate increase for next year of 13.9 percent for enrollees in the company's Blue Advantage coverage for individuals. That was a compromise over Blue's original request for an 18.6 percent hike. Under current rates, a 40-something mother in Durham pays somewhere in the neighborhood of $291 a month for coverage for herself and one child (that's Plan A, with a $500 deductible, according to Blue's online rate quotes). If she's pregnant, her premium jumps to $546 a month.

Blue Cross states in its plan (in language one consumer advocate describes as "Clintonesque") that its rates will not rise due to conversion itself. Rather, the company says, market forces will continue to be the driver of rising premiums--including the high cost of prescription drugs and more aggressive use of health-care services by patients. The company's conversion plan posits that a for-profit Blue may actually be under less pressure to raise rates because it will have access to other sources of capital, whereas "as a nonprofit ... its main source of funds for improvements is customer premiums."

A study commissioned by the DOI backs Blue up--at least on the first point. In reviewing Blue Cross conversions in other states, researchers found no evidence that premium rates rose through the roof after the plans went for-profit. Case studies of Blue Cross plans in California, Georgia, Missouri and Virginia found rates generally followed market trends and tracked the competition. Profits came from reduced administrative costs, more aggressive provider negotiations and more careful underwriting. Still, the study cautions "a better view of the impact of conversion on insurance premiums would require interviewing more insurance agents in different parts of these states and focusing more on the individual market."

Just such a review was done by the state of Kansas in considering a buyout bid from Anthem for that state's nonprofit Blue Cross late last year. In February, Kansas Insurance Commissioner Kathleen Sebelius rejected the deal, based on an independent study that showed Anthem would have to jack up premiums by 7 percent above the 15 to 20 percent hikes experts are projecting in order to make its desired profits. A state court judge overturned her decision in June and the case is now headed to appeals court. (Sebelius hopes she's headed to the governor's office--she's running on the Democratic ballot in the November elections.)

4. Will conversion reduce access to care by vulnerable groups?
Blue Cross assures us it will not. The conversion plan states that Blue will continue its "strong commitment" to coverage for individuals and small groups--traditionally the riskiest to insure--as well as its subsidized Access program for individuals who are "otherwise uninsurable." Greczyn says the company will also continue to serve customers in all 100 counties.

But some health-care experts wonder how those promises can be kept if the new for-profit Blue is to make enough money to keep shareholders happy. Already, Blue has set projected profit margins at 6 percent for some lines of business--double what they are now.

"The facts of life are that small groups are very risky," says Glenn Wilson, a retired professor of medical economics at UNC-Chapel Hill, who has signed up to speak at the Raleigh public hearing. "Profit in health insurance comes from deleting the vulnerable people who need coverage. Small farmers, small merchants will be in the soup."

Already, Blue has dropped some groups viewed as too expensive to insure, and has raised premium rates on others to the point where they can no longer continue coverage.

"It's ridiculous," says Amy Jelovsek, human resources manager for the North Carolina Bar Association, which had to set up its own self-insured plan after Blue Cross decided to discontinue association plans last year. "We're coming to a time real soon when you are going to see health insurance payments go higher than a mortgage."

Enrollments in Blue's Access plan--a vestige of its historic role as "insurer of last resort"--also raise concerns. Financial statements filed with the DOI show the number of policyholders in the plan for those not eligible for Medicaid, Medicare or private insurance has been dropping steadily. At one time, the program had more than 1,000 subscribers. By March of last year, that number had fallen to 78. One obvious reason is that premium rates for Access are astronomical--$1,512.73 a month for an individual subscriber. For a subscriber, a spouse and one child, the price tag is $3,361.28.

The Access program was created in the early 1990s at a time when the DOI was trying to expand health-care access by creating a high-risk pool funded by a premium levied on insurance companies. The companies defeated attempts to get legislation passed to begin the program. As a result, DOI turned to Blue Cross and "asked them if they wanted to be the insurer of last resort," Pearson says.

While Blue Cross hasn't been playing that role for some time (experts say not since the federal Medicare and Medicaid programs were created in the 1960s), its nonprofit history gave regulators leverage to make their request. After all, Blue grew out of organizations founded during the Depression to help North Carolinians who couldn't afford health insurance, their reasoning went. And Blue pays lower premium taxes because it's willing to serve all markets.

Greczyn, whose tenure at Blue Cross began after Access was created, denies the company was ever leaned on to begin the program. He says Blue can go for-profit "and still have a social conscience."

But many consumers and health-care providers worry that conversion will close out opportunities to involve Blue Cross in future efforts to improve access to care. Nonprofits and for-profits "have divergent missions and views about the way health care is delivered," says Bernstein, of Raleigh Pediatric Associates. "One is to try and take care of everybody at a reasonable price and the other is to make sure the bottom line is taken care of. To me, that's a disturbing divergence."

In other states where Blues have gone for-profit, the DOI's study found a mixed track record on access to care. California's Blue Cross is "notable for its strong presence across the board in public insurance programs that serve the poor and high-risk populations," the report says, whereas the Missouri plan has pulled back from some of its product lines and service areas because of "profitability concerns."

5. Will conversion make it harder for hospitals and doctors to negotiate with Blue Cross?
Historically, good relations with health-care providers were a mainstay of Blue Cross' business. The company was created by doctors and for decades was run by physicians and hospital officials. But relationships began to fray in the managed care era, as Blue cut payments to providers as a way of controlling costs. The ties were strained even further in 1996, when former Blue Cross President Ken Otis recommended a change in the company's board structure that ousted physicians and hospital representatives. Otis argued providers had a conflict of interest because many were launching their own managed-care programs.

Hospital leaders say Blue Cross is continuing to squeeze payments at a time when hospitals can ill afford it. "As costs continue to increase and reimbursements continue not to keep pace, hospitals will be faced with difficult decisions about what services to provide," says Don Dalton, of the North Carolina Hospital Association. "Services that don't make money, like the ER, obstetrics and ICUs are the ones we'll be looking at."

Some providers have simply started refusing to accept Blue's rates. Eric Fletcher, director of public relations and marketing for High Point Regional Hospital, says his hospital was on the verge of canceling its contract with Blue Cross over the issue of $1 million worth of payment reductions. They reached a compromise after the situation made newspaper headlines and consumers started complaining. "That's who has the ultimate power with an HMO, the people who pay the premiums," Fletcher says. "When members in our service area got upset and started calling, it worked and we were able to get a deal done."

Blue's current behavior with providers has hospital leaders like Fletcher anxious about what will happen if it goes for-profit. "What may be even more scary is that there are fewer and fewer insurance companies in the region with all the consolidations going on," he says. "That makes it harder for a hospital not to accept [lower] rates."

Greczyn counters that consolidations and mergers are also going on in the hospital industry and that means fewer hospitals Blue can negotiate with for customers. "Care is more expensive when there is no competition and no alternatives," he says. "That's not just a Blue Cross problem, it's a societal problem."

6. Will the one-time investment in the new foundation be equal to the public's investment in Blue Cross?
Consumer advocates say that depends on what the foundation is able to do and how much money it will have to spend. The conversion law calls for 100 percent of Blue's stock to go to a foundation that will "promote the health of the people of North Carolina." After that, the foundation will raise money for grant programs by selling its shares and making investments. The DOI estimates the foundation could be worth up to $3.5 billion based on Blue's market value at the time of conversion. (One real-world comparison is the $4.2 billion that Anthem paid for Trigon Blue Cross in Virginia.)

Nonprofit leaders say the new foundation's initial resources and broad mission--as well as protections in the state's conversion law against interference by political leaders--bode well for its future effectiveness. The foundation's 11 initial board members were chosen by the attorney general from a list of nominees developed by an independent advisory group of health, nonprofit and business leaders. Among those appointed last month were Tom Lambeth, former executive director of the Z. Smith Reynolds Foundation, Charles Sanders, chair of the Terry Sanford Institute of Public Policy at Duke and former CEO of Glaxo, Inc., and Pam Silberman, associate director for Policy Analysis at the Sheps Center for Health Services Research at UNC-Chapel Hill.

Still, even with the best intentions, some nonprofit leaders worry that the new foundation won't have enough of an impact on critical health issues.

"There are varying opinions from politicians to corporate leaders on what creates good health in a community," notes Bob Parker, a member of the Health and Wellness Trust Fund Commission, an agency set up to distribute health-care grants from the state's tobacco settlement. Earlier this year, the commission saw the bulk of its funds funneled from smoking prevention to a prescription drug program backed by the governor. "If we could have a foundation that was exempt from the wishes of politicians and powerful individuals, that would be a blessing for the state," Parker says. "If the foundation were truly set up to improve health and not apply the funding to the sick care system, I'd be in favor of it."

Blue Cross cites creation of the foundation as a key reason why conversion to a for-profit is in the public interest. Company press releases spend at least as much space on that as on describing how a new Blue will improve services to customers. It's an argument even many of the company's critics find hard to resist--especially given the many ways Blue's already acting like a for-profit.

The foundation means "conversion could potentially provide for a broader group of people than Blue Cross presently covers," says state Sen. Ellie Kinnaird (D-Orange), who helped stop the original foundation-less conversion law. "It could be potentially better than what we have now."

In other states, foundations created by Blue Cross conversions have funded medical education, health research and higher salaries for health-care workers. But few have the resources to do what the original nonprofits were set up to do: pay for expanded health-care coverage for the poor.

And that, says Dawn Touzin of Community Catalyst, is where the scales ultimately need to be balanced when it comes to conversion. "Because regardless of how much money goes into a foundation, that's a one-time infusion of capital," she says. "You have to measure that against the ongoing nonprofit performance you are losing."

7. Does Blue Cross need to go for-profit to be successful?
Not if you consider how profitable the company is now, health advocates say. Bounding back after recent losses, Blue Cross reported net income in 2001 of $85.6 million and revenues of $2.08 billion--up from $66.6 million on $1.8 billion the previous year. (See "Blue Index," pg. 29.)

The company has spent money on new computer systems, insurance products and on acquiring Partners National Health Plans last year, a purchase it was able to write off on its financial statements and which added to Blue's enrollments.

But consumer advocates aren't convinced those expenses justify the hefty surpluses the company's been wracking up. "I haven't seen a coherent explanation of why they're making so much money and are still a nonprofit," says Adam Searing, head of the N.C. Health Access Coalition.

State regulators have also been demanding more details. A letter from the DOI's General Counsel Peter Kolbe to Blue Cross in August asks, "If BCBSNC, as a nonprofit insurer, is able to increase its profit margins (through administrative savings and other means), why should this not be transferred to policyholders in the form of a reduction of premiums instead of enhancing the surplus of an already highly capitalized nonprofit organization?"

Greczyn insists Blue's current edge will quickly be lost if it can't pursue other sources of capital--and that means going for-profit. He says the company needs $150 million at least for new computer and Internet systems, as well as money for new claims-processing services and new products to keep up with the competition. "The rollout will be expensive," Greczyn adds. "United has spent $1.4 billion on technology in the last few years. For us, the only way to pay for that is to build it into the premiums or go into debt."

The company's current profits and healthy market share make this an optimal time to convert, Greczyn says, noting, "You don't convert when your performance stinks. That could hurt the foundation."

What happens if Blue Cross' conversion plan is turned down by the DOI?

Greczyn says nothing much, in the short term. "But right now, there's a sea change in the insurance business that requires huge investments," he says. "We need to be able make those investments and if we can't make them in a timely way, we'll fall behind. And then it will be too late."

Some consumer activists worry that if Blue Cross is turned down or decides to withdraw its application, it will go back to the legislature to change the conversion law to make future attempts easier. The company has been making sizable campaign contributions in the past few years--on both sides of the aisle. Greczyn insists Blue supports the current conversion law.

Nationally, not all Blues plans are following the for-profit track. The Advancing Nonprofit Heath Care Coalition is a group of a dozen Blues that have decided to market themselves as nonprofits. Baltimore Sun reporter William Salganik notes that one of them--the Massachusetts Blue--is thriving as a result. Of 15 Blues plans (both profit and nonprofit) tracked in a recent study in the journal Health Affairs, it had the biggest revenue increase and the second-largest increase in membership in the past three years. "After overcoming financial troubles," Salganik writes, "the Massachusetts Blues have become so prosperous that the insurer set up a foundation a year ago to help the state cope with unmet health needs."

So is conversion to a for-profit North Carolina Blue an imperative? That's a question this week's public hearings may start to answer more fully. To be fair, many of the issues involved--like how best to cover hard-to-insure groups and why premiums are rising so fast--are way bigger than Blue Cross, as are the reasons the company has been acting more like its for-profit competitors in recent years.

Grezcyn says that's why his company's application should be approved, because none of those bigger issues will be affected if it goes for-profit. "Nobody has shown me how we will become less than we are because of conversion," he says.

But what regulators and consumers seem to be saying is that nobody's yet shown how the company will be more. And that's the case Blue needs to start making if it wants to keep the public trust.

"It would be good if we could make conversion work," says Moses Carey, executive director of Piedmont Health Services, which operates health clinics in the Triangle and Triad that serve mostly uninsured patients. "But it's valueless if we don't protect the safety net of public organizations that have been created by public resources." EndBlock

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