Blue Cross Blue Shield of Delaware and Highmark inched closer toward affiliation with the state legislature's passage of a law that allows the insurers to evade restrictions set forth by the attorney general's office.
The bill, which is expected to be signed by the governor, exempts nonprofits from setting aside funds gained through tax-exempt status. If the law wasn't passed, Attorney General Beau Biden's recent opinion would have required Blue Cross to create a foundation protecting its $175 million reserve from being spent elsewhere, reports the Pittsburgh Business Times.
Biden had determined the Blue Cross-Highmark deal constitutes a "nonprofit healthcare conversion" under a 2004 state law, which was designed to protect public investment in nonprofits that had become takeover targets.
After Biden released his opinion, Blue Cross reached out to the legislature for help because Highmark said it would walk away from the affiliation if it was considered a conversion, even though Blue Cross has ensured that the reserves would remain in Delaware.
However, the bill does set up certain safeguards for Blue Cross' reserves by allowing the Delaware insurance commissioner to review and approve any change in Blue Cross' certificate of incorporation, as well as any expenditure or transfer of funds to Highmark exceeding $500,000. Additionally, it allows the insurance commissioner to sue to prevent Highmark from improperly using Blue Cross' assets for its own benefit, according to the Associated Press.
The deal would allow Blue Cross to pay Highmark to tie into its claims processing and risk management systems and let Highmark essentially take control of the local company, the Delaware News Journal reports.