New York State Approves Empire Blue Cross and Blue Shield For-Profit Conversion

The New York state Insurance Department and Department of Health on Oct. 9 approved the conversion of Empire Blue Cross and Blue Shield from a not-for-profit health insurer to a for-profit company, the New York Times reports. Under the terms of the approval, Empire must hold public hearings on the proposed conversion and cannot raise premium rates more than 10% for 125,000 members with Medicare supplemental policies and 21,000 with hospital insurance for the first several years after the conversion. In addition, the insurance department mandated that Empire employees and directors cannot receive stock or stock options in the new company for one year after the conversion. Empire, which will become WellChoice, has registered to sell stock at an estimated value of $1 billion. Empire "still faces a hurdle" in the state Supreme Court on Nov. 7, when the court expects to rule on a lawsuit filed by consumer groups to block the conversion on constitutional grounds (Freudenheim, New York Times, 10/9). In many states, funds raised from the sale of stock after a Blue Cross plan conversion belong to the constituency of the former not-for-profit organization. Several Blue Cross plans that have converted to for-profit companies in the past few years have used funds from the conversions to establish large health care foundations (Kaiser Daily Health Policy Report, 8/22). In New York, however, Empire will use the funds in large part to increase wages for members of Service Employees International Union Local 1199, which represents a large number of health care workers (New York Times, 10/9).