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Battling Over Blue

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Newspaper reports following last week's public hearing on Blue Cross and Blue Shield's request to go for-profit described the "heavy hitters" who showed up to support the change. Specifically, that phrase was aimed at two of the 64 folks who signed up to testify at the cavernous McKimmon Center in Raleigh (only about 35 actually spoke)--former governors Jim Holshouser and Jim Hunt.

Despite the status they were granted in print, at the hearings, neither of the Jims was all that heavy. At the podium they bunted--focusing, not on the baseline issues of how Blue's conversion will affect insurance rates and access to health care, but on the charitable foundation that will be created if the company's proposal is approved by the state Department of Insurance (DOI) and the Attorney General.

Republican Holshouser, who spoke early on in the nearly six-hour hearing, called establishment of the foundation, "one of the most important events for our state," and reminded regulators that, "this is going to be at no cost to the taxpayers."

Democrat Hunt, who appeared near the end, lauded the foundation as a way to fulfill some of the unfinished goals of the Smart Start early childhood program he launched while in the governor's mansion--this time with private money. "This is an opportunity that will probably never come our way again," Hunt warned. "The only chance we have is if Blue Cross converts."

Such arguments might have scored more points back in January when Blue first submitted its conversion plan--back before consumer advocates and state regulators started asking tough questions about the dollar value of the new foundation and how much control it will have over business decisions that could chip away at that value. (Blue's latest "voting trust agreement" still doesn't satisfy consumer leaders, who point to restrictions on the foundation's votes on future executive stock option plans and the removal of a ban on "break-up fees" that potential for-profit buyers would be allowed to charge if a sale doesn't go through).

Given the concerns that have heated up in the past few months over Blue Cross conversions gone awry in other states, the governors' urgings seemed off the point. The heavier "hitters" were the health-care activists, Blue Cross policyholders and nonprofit leaders who argued that the company's conversion plan fails to meet the state's standard of being "in the public interest."

Martin Eakes, head of the Durham-based Center for Community Self-Help, was one of those. Self-Help, with $700 million in assets and a nonprofit mission to serve the underserved, "is in many ways exactly like Blue Cross--at least, the way Blue Cross was 20 years ago," Eakes said. But "in my view, Blue Cross has lost its soul" he added, by building up huge reserves while raising rates on vulnerable groups.

Elton Turner, a retired state worker from Moore County whose wife, Evelyn, is a Blue Advantage policyholder, worried that the potential benefits of a foundation won't outweigh future premium increases by a for-profit Blue. His wife's premiums have already risen by more than 400 percent since 1993, Turner said. "If they are this hard-nosed as a nonprofit, can you image what it would be like if they converted?"

Using the foundation as a carrot for conversion has been a favored strategy of Blue Cross supporters, and it's worked pretty well up to now--especially since concrete answers to difficult questions about insurance rates and access to care remain sealed in a confidential business plan the company has submitted to the DOI. Now that the public portion of the conversion process is in play, the carrot doesn't look quite so tempting and Blue's backers are on the defensive. (Was it a coincidence that most of those testifying for conversion had business or professional ties to Blue Cross?)

After hearing some of the critical comments preceding him, Holshouser strayed momentarily from his prepared statement: "I hope we haven't reached the point where profit is a dirty word in the state of North Carolina," he scolded.

But the message from consumers testifying at the hearing was, when it comes to health care, maybe it should be.

(The third and final public hearing on Blue Cross' conversion plan will be held in New Bern today. The DOI may keep the public comment period open for an additional 10 to 30 days before making a decision. For details, visit the DOI's Web site at: www.doi.nc.state.us.)

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