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Montana lawmakers OK nonprofit healthcare conversion bill

March 25, 2005

Montana lawmakers pass comprehensive healthcare conversion legislation

Consumers Union urges Governor Schweitzer to sign bill to protect nonprofit health assets

By overwhelming majorities in both houses, the Montana Legislature this week approved SB 317, a bill regulating the conversion of nonprofit health insurers into for-profit businesses. If signed into law by Governor Schweitzer, Montana’s conversion law will rank among the best in the nation.
Senators Greg Lind (D-Missoula) and John Cobb (R-Augusta) and Representative Tom Facey (D-Missoula) sponsored the bill. “My colleagues in the Legislature and I have learned from the problems faced by regulators in states without clear nonprofit conversion laws,” said Senator Lind. “This new law would provide consumers and regulators with the tools they need to evaluate a health insurer’s proposal to convert to a for-profit business. And the health insurer itself will be aware from the outset of the roadmap it must follow if it embarks upon a conversion,” stated Lind.
Because of tax advantages bestowed upon nonprofit organizations, their assets are essentially owned by the public. Montana common law already requires such assets to continue to be used for a charitable health purpose if a nonprofit converts to a for-profit business. As a result of health conversions nationwide, over $16 billion has been preserved in 180 independent foundations that carry on the charitable mission of addressing community health needs.
According to Scott Benbow, staff attorney in Consumers Union’s West Coast Office, “Montana’s bill provides strong protections for consumers in Montana, reduces the likelihood of litigation against the state, speeds up the conversion proposal review process, and prevents the depletion of the charitable assets. We applaud Montana lawmakers for protecting consumers and we urge Governor Schweitzer to sign this bill into law.”
If signed into law, this legislation will strengthen and clarify its common law protections of nonprofit dollars. In the event of a health insurer conversion, the legislation will prevent nonprofit assets from slipping into private pockets and will preserve dollars for critical healthcare needs.
Montana’s conversion legislation:
• establishes a clear application process for nonprofit health plans seeking to become for-profit companies;
• requires public notice, the opportunity for the public to submit comments, public hearings across the state, clear discovery powers of regulators, and unfettered public access to conversion proposals and all accompanying documents;
• creates a transparent system for distributing the assets to a foundation or another nonprofit organization, if the regulators authorize a nonprofit health insurer to become for-profit companies; and
• is revenue neutral because it requires a company proposing a conversion to pay reasonable costs by state regulators reviewing the proposal.
While Montana nonprofit health plans maintain that they have no intention of converting, legislators acted to protect consumers and preserve health assets in advance. Rumors that one of the health plans might have been preparing to convert several years ago may have prompted lawmakers to act in the current legislative session. In so doing, they have provided clear guidance for companies who might eventually consider converting as well as clear criteria by which regulators must examine a proposal.
For more information:Scott Benbow – 415-431-6747