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New York Supreme Court Allows Suit Challenging Empire Blue Cross Deal To Go Forward

Wednesday, October 1, 2003
Charles Bell, Programs Director
914-378-2507 / 914-830-0639 (cell)
Mark Scherzer, Attorney for Plaintiffs
212-406-9606 / 917-544-6464
Laurie Sobel, Senior Attorney
415-431-6747, ext 133 / 415-902-9537 (cell)

Suit Charges That New York Legislature Violated State Constitution
by Passing Special Interest Law for the Benefit of One Corporation

NEW YORK CITY, NY – A lawsuit challenging the constitutionality of a law passed by the state legislature allowing Empire Blue Cross and Blue Shield to abandon its nonprofit status will be allowed to go forward, the New York Supreme Court decided today. The court rejected a motion to dismiss the suit filed by Consumers Union and a group of policyholders, which alleges that the legislature violated the state’s constitution when it passed a statute last year strictly for the benefit of a single corporation — Empire Blue Cross and Blue Shield.
“The law authorizing Empire to become a for-profit corporation was a blatant example of special interest legislation because it applied to only one corporation, which the state constitution expressly bars,” said Laurie Sobel, Senior Attorney with Consumers Union. “This deal will lead to higher insurance premiums for New Yorkers and the loss of billions of dollars in assets that should remain dedicated to expanding access to affordable healthcare coverage in the state.”
The statute in question authorized Empire to abandon its nearly 70-year history as a nonprofit insurer to become a for-profit corporation. It was negotiated by Governor George Pataki in secret and passed by the legislature in the middle of the night in January 2002 without public hearings.
The suit notes that the state constitution prohibits private laws “granting to any corporation, association or individual any exclusive privilege, immunity or franchise whatever.” The statute passed by the Legislature authorized nonprofit corporations to become for-profit insurers if they had secured an “initial” opinion and decision by the Superintendent of Insurance on or before December 1999 allowing such a conversion. No corporation other than Empire received any sort of opinion and decision by the Superintendent regarding a proposal to become a for-profit business prior to that date.

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