NJ Gov. Signs Horizon Bill After Speedy Trip Through Legislature

Eric Kiefer

NEWARK, NJ — A major corporate reorganization at the state’s largest health insurer is marching forward in New Jersey.

On Wednesday, Gov. Phil Murphy signed A-5119/S-3218 into law, clearing the way for Horizon Blue Cross Blue Shield of New Jersey (BCBSNJ) to convert from a health service corporation to a not-for-profit mutual holding company.

Horizon is seeking to expand the types of investments it makes; the law was a crucial step in the legal process.

Horizon, which has a headquarters in Newark, trumpeted the law as a win for its 3.6 million members, who could ultimately see more competitive premiums as part of a reorganization.

Critics have argued that they’re concerned about the lack of public debate surrounding the proposal, and have alleged that the new law will allow Horizon to "take nearly $6 billion of public funds and invest it in Wall Street to the benefit of stockholders."

Horizon will now be authorized to submit an application for reorganization to the Commissioner of Banking and Insurance. If reorganized, Horizon BCBS would continue to be under the supervision of the Department of Banking and Insurance, with oversight by the state attorney general.

Upon establishment of the not-for-profit mutual holding company, Horizon BCBS would be required to pay a one-time, initial assessment of $600 million to the State Treasury, and pay an additional $625 million to the state over 17 years after its reorganization.

See details about the proposal via Horizon here.

Assemblyman John McKeon (District 27), one of the bill’s sponsors, offered a statement in support of the legislation.

“Right now, the company is limited in the ways it can stay competitive to benefit its 3.6 million members,” said McKeon, who represents several towns in Essex and Morris counties.

“We must allow this organization to adapt its infrastructure so that it can make the investments it needs to in order to offer stable rates, promote innovative health care services and meet the evolving needs of its members – all while maintaining its charitable mission,” McKeon said.

Allen Karp, an executive vice president at Horizon, previously said the legislation removes "outdated restrictions" that limit the scope and scale of Horizon's investments, and which don't apply to its out-of-state competitors.

Some of those include:

  • Horizon can't invest more than 2 percent of its current revenues in any single opportunity

  • At least 50 percent of Horizon's business must come from "commercial health insurance business"

  • Horizon is limited to 10 percent of its current revenues in the aggregate for all of its joint ventures and investments

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Opponents of the proposed reorganization at Horizon have been putting up red flags about the plan, however.

Earlier in December, Advocacy group New Jersey Citizen Action released a joint letter on the issue from a group of 40 public interest organizations to Gov. Murphy, Senate President Stephen Sweeney and Assembly Speaker Craig Coughlin.

The groups wrote:

“We, the undersigned organizations are writing to ask your immediate attention to concerns regarding fast-tracking of S3218/A5119, the recently introduced Horizon reorganization bill, and the lack of opportunity for public input and expert feedback.

“The legislation to permit Horizon to undertake a complete corporate restructuring has serious and not yet clearly understood health and financial implications for the state and people of New Jersey and puts billions in public assets at risk. More time and information is needed in order to fully consider the proposals within the bill and ensure the billions of dollars in public assets, as well as the health of the people of New Jersey, are protected moving forward. As a charitable health services corporation and New Jersey’s largest insurer, Horizon has a unique mission and responsibility to the people of New Jersey. They provide coverage for 2.8 million residents, and administer the benefits for the 800,000 enrollees in the State Health Benefits Plan, and have tremendous influence on the health and wellbeing of all our residents. Previous conversion attempts resulted in legislation that set forth the process and protections in the event a conversion or change in form was undertaken in the future that require Horizon to make a charitable trust payment equal to the full fair market value of the company’s assets currently estimated at $7 billion. The proposed legislation in S3218/A5119 would allow Horizon to circumvent that requirement and spread the value of the company across an unlimited number of for-profit subsidiaries while guaranteeing only a minimal payment to free them of their obligations.

“Though Horizon may contend otherwise, the fact remains that the 2001 law is broader in scope than just conversions directly to a for-profit stock company, and it would be triggered in this instance by that law’s change in material form provisions. Horizon is in fact changing to permit private investment and private gain essentially making them a for-profit. The 2001 law recognized that if and when Horizon ever desired to change their corporate form, its public assets must be protected to secure the public good and public health. That is the principle the Legislature and governor must uphold and guarantee, as required by law.

“Therefore, we ask your public commitment that no bill will proceed without the following:

  • Multiple legislative hearings that allow for full and fair public participation

  • Full public disclosure of Horizon’s assets, including reserves

  • A guarantee that full value of the charitable assets will be fully protected in any reorganization

  • The attorney general issuing a formal opinion on the proposed restructuring in his capacity as protector and enforcer of charitable trusts and corporations

  • At minimum, a requirement that an independent health impact study be done as part of the approval process so that all stakeholders fully understand how this would affect affordability and access to healthcare, particularly for communities of color and the remaining uninsured in our state, as set forth in S-375 (2010)

Sen. Anthony Bucco (District 25) and Sen. Gerry Cardinale (District 39) have also questioned the plan, saying that it could pose a risk for ratepayers and be “inequitable” for policyholders and property taxpayers.

“I have serious concerns that any failures in the for-profit operations that would be allowed by this legislation would impact Horizon’s ability to meet its core non-profit mission of serving ratepayers who would be stuck with the tab for any losses,” Bucco said.

“I’m also concerned that there are no restrictions on how the state could spend the initial $600 million payment from Horizon or the smaller payments in future years,” Bucco added. “That money will end up going into the state’s general fund and it will disappear with nothing to show for it.”

Cardinale questioned how it was determined that $600 million was an appropriate value for the payment and asked if giving that money to the state is equitable.

“It’s not clear how the $600 million figure was determined or if Horizon can pay that amount without impacting its ability to serve its customers during the coronavirus pandemic,” Cardinale stated.

“If Horizon has this huge pot of money available, wouldn’t it be fairer to return those excess premiums to the individual policy holders and local governments and property taxpayers who paid more than they should have?” Cardinale questioned. “Why does the state deserve this money?”


Executive Chairman Kevin Conlin and President/CEO Gary St. Hilaire issued a joint statement after the bill was signed into law last week.

They wrote:

“Today’s vote recognizes that health care, and the expectations and needs of health consumers, are rapidly changing. Over the past three years, countless hours of discussion, deliberation, and critical thinking by many legislators, administration officials and stakeholders helped guide and improve this legislation. As a result, it achieves its goal of preserving Horizon’s historic member-focused mission while giving the company the flexibility to adapt and innovate to enable care that is more connected, more convenient, and more affordable. We thank everyone- particularly Senate President Sweeney, Speaker Coughlin, and our primary sponsors Senators Nellie Pou and Paul Sarlo and Assembly members McKeon, Downey, Wimberly and Clifton - who supported giving our 3.6 million members a better Horizon and look forward to making that vision a reality.”

The new law contains a “can’t convert clause,” one of several oversights and protections, according to Assemblyman Benjie Wimberly (District 35).

“Reorganization will help stabilize premiums at a time when affordable health care is so critical for families throughout our state,” Wimberly said.

“By reorganizing in this manner, Horizon would still be the charitable insurer so many families rely on but would also be free to help promote medical advances that everyone can benefit from,” said Assemblywoman Joann Downey (District 11).

“This is a win-win for the entire state,” Downey said.

An executive at Horizon offered a pitch for the company's plan last month, which can be seen in full here.

According to William Georges, a senior vice president and chief strategy officer at Horizon:

"The bill before the state legislature protects what makes our company unique. It preserves our historic mission as New Jersey's only not-for-profit health insurer with strong ties to its communities. At the end of the day, we would still be accountable to and operate for the benefit of our members, who are Horizon policyholders – not shareholders or anyone else … Importantly, this new law will strengthen the guarantee that Horizon remains forever a not-for-profit that exists for the benefit of its members. This change means that Horizon cannot be sold or change to become a for-profit company that is owned by shareholders or investors."

Georges continued:

"The legislation recognizes that, as a not-for-profit and consistent with current state law, Horizon BCBSNJ's assets – all of them – must and will continue to be used to advance our non-profit mission. And, as noted, the law will now permanently preserve Horizon's not-for-profit mission and ensure that a stronger Horizon will forever be focused on one thing only: improving the health of our members and the well-being of the communities we serve. In the event that we ever sought to become a for-profit entity – a change we have no plans to make – all of Horizon's assets would be transferred to a not-for-profit foundation aligned with the state. This provision is an important protection for the public that stakeholders have rightfully sought."

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This article originally appeared on the Newark Patch