HNF Stories
11:20 am
Thu July 25, 2013

State Reviews Florida Blue Plan as Watchdogs Question how Law Changed

Reprinted with permission from the Palm Beach Post

A proposed reorganization of the state’s largest health insurer comes before a state insurance hearing Thursday in Miami, but a watchdog group says it is disappointed by the handling of legislation Gov. Rick Scott signed June 7 that Florida Blue sought to help it expand after the change.

An amendment added on the Senate floor by state Sen. Joseph Abruzzo, D-Royal Palm Beach, passed with little debate and no staff analysis in that chamber before the vote, as far as Integrity Florida can see.

“Probably when that happens it is the result of some pretty shrewd lobbying efforts,” said Ben Wilcox, research director for Integrity Florida, a Tallahassee group that calls itself a nonpartisan, nonprofit research institute and government watchdog. “It’s disappointing the public wasn’t allowed to weigh in on it.”

Florida Blue wants to create stockholder-owned companies under a not-for-profit mutual insurance holding company. Corporate officers could gain from future stock deals, and company documents acknowledge proposed changes could pose a conflict between its board’s traditional duty to provide low-cost insurance to its 4 million policyholders and a new duty to do what’s best for shareholders, The Palm Beach Post reported Sunday. One analyst called the proposed corporate structure “bizarre.”

Florida Blue is the largest corporate donor to Scott’s Let’s Get to Work political committee, giving more than $937,000, and it ranked as the top contributor overall to Florida politicians and parties in the 2012 election cycle with $4.8 million. The insurer’s registered lobbyists include former Duval County Republican Chairman Mike Hightower, also the former Bush-Cheney chairman for the region.

Asked whether the governor was comfortable the amendment had received sufficient scrutiny, Scott spokesman John Tupps said, “You should check with the legislature on this.”

Tupps repeated an earlier statement saying Scott takes no position on Florida Blue’s reorganization and it is up to the state’s Office of Insurance Regulation, which is conducting the Miami hearing, to review the proposal. Policyholders must approve the plan as well.

The underlying bill Scott signed last month, SB 356, lets insurance companies that don’t issue stock insure municipal bonds. The amendment makes changes to state law that Florida Blue sought to help it with future mergers and acquisitions of not-for-profit insurance companies and health plans as well as stockholder-owned concerns, if its reorganization is approved.

As for the company’s application to reorganize itself, Office of Insurance Regulation General Counsel Belinda Miller said it “could have been filed in the same way that it actually is filed without any change in the law.”

Florida Blue spokesman Paul Kluding said, “The legislative amendments were not needed for purposes of the filing for the MIHC reorganization, but provide additional clarification and flexibility to address marketplace changes.”

Regarding scrutiny, he said, “The amendments passed unanimously in the House Regulatory Affairs Committee as well as the full House and Senate.” The House dropped a companion bill and passed the Senate version.

Abruzzo, who did not return a call for comment, withdrew a late-filed amendment in the Senate Commerce and Tourism commitee April 1 after asking Florida Blue lobbyist Paul Sanford to speak to the committee.

“I think there’s been some concern raised over this amendment, and I’m not quite sure what it is, but basically all this amendment does is allow mutual insurance holding companies to own a not-for-profit insurer,” Sanford said at the time.

Company officials said they plan no particular acquisitions or stock incentive plans for executives and insisted policyholder premiums and coverage won’t change as a result of the reorganization.

Florida Blue paid at least 14 officers and directors more than $1 million each in 2012 at the non-profit insurer based in Jacksonville, with more than half of those receiving a raise of at least $500,000 from 2011, documents obtained by The Post show.

Florida Blue’s Reach

*Biggest corporate donor to Gov. Rick Scott’s Let’s Get to Work political committee ($937,500) and to state politicians and parties overall in the 2012 cycle ($4.8 million)

*One of Florida’s largest employers, with approximately 9,500 of its nearly 11,000 employees located in the state.

*Florida Blue and subsidiaries serve more than 15.5 million people in 16 states. In its primary health business, Florida Blue serves more than 4 million members, which represents a 30 percent share of the overall Florida health insurance market.

Public hearing by the state’s Office of Insurance Regulation on Florida Blue’s reorganization plan

5:30 p.m. Thursday

Miami-Dade College (Wolfson Campus), Auditorium Room 1261, 300 N.E. 2nd Avenue, Miami

Comments: BCBShearing@floir.com

What next: Must be approved by regulators and policyholders

More information: http://www.floir.com/Sections/LandH/BCBSHearing.aspx

On Sunday, The Palm Beach Post reported that executives could gain from Florida Blue’s reorganization plan. Subscribers can read the story at http://www.mypalmbeachpost.com/s/investigative/

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