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Anthem Insurance reorganization could harm consumers

February 7, 2001

Groups Urge Regulators in Eight States to Conduct Independent Review

Consumer health advocates today urged state regulators in eight states to take steps to ensure that a recent proposal by Anthem Insurance Company, Inc. to convert to a stock corporation will not unfairly impact consumers. If the company becomes a stock corporation, advocates are concerned that consumers may face higher premiums and have less access to healthcare. Community groups are also concerned that policyholders in some states will receive a share of the value of the company under the reorganization, while policyholders in other states will not.
“We call on state regulators to look very carefully at this proposed conversion,” said Renee Markus Hodin, an attorney with Community Catalyst. “The continued affordability of health insurance and access to coverage are at stake for over 33 million people living in the states where Anthem operates.”
Anthem owns more Blue Cross plans than any other company in the nation. It now operates in Indiana, Kentucky, Ohio, Connecticut, New Hampshire, Maine, Colorado, and Nevada. Community Catalyst and Consumers Union have long raised concerns about the corporatization of healthcare, particularly in the shift away from nonprofit status by Blue Cross plans. Anthem’s announcement heightens those concerns.
“As a for-profit stock insurer, Anthem will owe its allegiance to its shareholders and not to policyholders and the community or state where it does its business,” said Laurie Sobel, an attorney with Consumers Union’s West Coast Regional Office. “We’re concerned that insurance premiums will inevitably rise, making it more difficult for families to afford the coverage they need, and that Anthem would have the market share to force other changes to the detriment of consumers.”
Anthem has been building its health insurance empire for years. It controls a significant portion of the health insurance market in eight states and, because of its size, has significant clout in the national association of Blue Cross plans. As the company took over nonprofit Blue Cross plans in state after state, community groups have raised additional concerns about how this might lead to a loss of local control and the inability to hold the company accountable on matters of pricing, benefits package design, and other key issues.
“As Anthem began to consolidate, we opposed the loss of local control in states like New Hampshire, where the Blue Cross plan had a long history of working with regulators to preserve affordable coverage, especially for vulnerable populations,” said Renee Markus Hodin.
There is some evidence that Anthem is less committed to protecting consumers than the former nonprofit Blue Cross plans it has acquired. For example, just months after completing its acquisition of the nonprofit Blue Cross plan in Maine, Anthem pressed the state to loosen it’s community rating requirements, lengthen the pre-existing condition period, lift deductible caps, and revisit other non-group consumer protections. Just a few years earlier, Maine Blue Cross and Blue Shield had worked with regulators to craft those very protections. Consumer health advocates in Maine have feared that, if approved, such changes in the non-group market would soon lead to the same changes in the small group market.
The impact of the proposed reorganization will vary for current Anthem policyholders, depending on which state they are from. As a mutual insurance company, Anthem is owned by its policyholders. Policyholders in Indiana, Ohio, Kentucky, and Connecticut have voting rights with the mutual insurer, but policyholders who have been paying premiums in Maine, New Hampshire, Colorado, and Nevada do not. As a result, policyholders in Indiana, Ohio, Kentucky, and Connecticut will receive a share of the full fair market value of the mutual corporation when it is liquidated before the stock sale, while policyholders in the other states will not.
“Anthem has established two unequal classes of policyholders — those who have rights and those who do not,” said Sobel. “Policyholders in Maine, New Hampshire, Colorado, and Nevada should receive their fair share of the company’s assets.”
“But it’s also important that Anthem policyholders in New Hampshire, Maine, Colorado, and Nevada have a voice in the decisions about the company’s future, even though they have been denied voting rights,” said Sobel. “This is why we believe that regulators in each of the eight states must review this proposal independently.”
Community Catalyst and Consumers Union plan to work with healthcare groups and regulators in the eight affected states to ensure that there is full public disclosure and public hearings in each state and a full independent valuation of the company is conducted. The groups will also investigate what conditions might be imposed on the conversion to protect consumers who now have Anthem health insurance policies.

Laurie Sobel, Consumers Union
The Community Health Assets Project (CHAP) is a national effort that seeks to preserve community health assets at risk in health sector restructuring, with a particular focus on the conversion of nonprofit healthcare institutions to for-profit status. CHAP is a joint effort of Community Catalyst and Consumers Union. Since 1996, the project has provided technical assistance to community groups, philanthropic leaders, regulators, and legislators in 35 states and has helped to preserve billions of dollars in community health assets including at least 130 healthcare foundations.
Community Catalyst is a Boston-based national advocacy organization that builds consumer and community participation in the shaping of our health system to ensure quality affordable healthcare for all. Consumers Union is the nonprofit publisher of Consumer Reports that was founded in 1936 to test products, inform the public, and protect consumers.