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Blue Cross Blue Shield decision could help Texans in need of healthcare

February 2, 2003

Consumers Union urges Court of Appeals to release $350 million decision
Blue Cross Blue Shield decision could help Texans in need of healthcare

AUSTIN, TX (2-4-03) — Consumers Union called on the Third Court of Appeals today to issue its ruling on the 1998 merger of Blue Cross Blue Shield of Texas with Blue Cross Blue Shield of Illinois. The decision will determine whether the merged Illinois Blues company will pay $350 million in charitable healthcare dollars to a Texas nonprofit foundation.
“In times of budget shortfalls, the state cannot meet all of the healthcare needs of its residents. Yet here is $350 million, languishing in the court for the past three years, that could have gone to a healthcare foundation to benefit needy Texans,” said Lisa McGiffert, a senior policy analyst with CU’s Southwest Regional Office.
Consumers Union supports a motion filed by Attorney General Greg Abbott last week asking the Third Court Appeals to expedite the release of its decision, McGiffert said.
In November 1996, then Attorney General Dan Morales filed suit to block the merger of the Texas Blues (a nonprofit) with the Illinois Blues (a mutual insurance company). The suit was intended to protect Texas charitable healthcare dollars from being siphoned away from the state. A 1998 lower court ruling would not have preserved the charitable assets of the Texas company. Morales allowed the merger to proceed with an agreement that, should he prevail in arguing a long-standing doctrine of common law, the Illinois Blues would pay $320 million over 20 years into a Texas charitable foundation. The lower court ruling was formally appealed and argued by the next Attorney General, John Cornyn.
“Time is money, in this case, money down the drain,” McGiffert said. “As this case has been sitting in the court of appeals, an estimated $20 million dwindled away because of lost interest. It is time for the court to release its opinion and move this case forward so these charitable dollars can be put to use for Texans.”
Under the law, the assets of a charitable nonprofit health plan, like the original Texas Blue Cross Blue Shield, must continue to be used for their original purpose if and when the nonprofit ceases to exist. Today, Texas Blue Cross Blue Shield exists in name only – it is owned and operated by an Illinois corporation.
Consumers Union has been involved in this case from the start. Thirty-five states also have dealt with Blues conversions in various ways. Over the past two decades, as a result of more than 160 healthcare conversions (Blues health plans and hospitals) in this country, over $15 billion has gone to independent foundations for community health needs. For example, when Blue Cross of California converted eight years ago, $3.2 billion was set aside in two independent foundations for public health projects throughout the state.
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Consumers Union
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