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Regence Deal May be an Enormous Northwest Giveaway, Consumer Groups Charge

April 23, 2001

Regence Deal May be Enormous Northwest Giveaway
Idaho, Washington, and Oregon and Utah Consumer Groups Urge State Regulators
to Stop the Giveaway of Regence Healthcare to an Illinois Insurance Company

Consumer groups in Washington, Oregon and Idaho are calling on state regulators to carefully scrutinize what looks like a takeover of The Regence Group by an Illinois based insurance company. The Regence Group includes Regence Blue Cross and Blue Shield health plans in Idaho, Washington, Oregon and Utah. The Illinois company is Healthcare Service Corporation (HCSC), is a mutual insurance company which includes Blue Cross and Blue Shield insurers in Illinois and Texas, and may soon include Blue Cross and Blue Shield of New Mexico.
This consumer coalition is concerned that HCSC is trying to acquire control of Regence without paying any money for the company. The “affiliation” proposal, filed with regulators in six states, gives HCSC a controlling majority on the TRG board and on the board of a newly created operating company known as Opco.
“This proposal gives an Illinois based insurance company control over Blue Cross and Blue Shield plans in Oregon, Washington, Idaho, and Utah, and could result in a multi-million dollar healthcare loss. HCSC should be required to purchase Regence outright, leaving the money in a charitable health foundation dedicated to serving the healthcare needs of the local communities,” said Barbara Gorham, Staff Attorney for Consumers Union. Regence plans in each Northwest state hold nonprofit assets that they have built up over many years, and are worth hundreds of millions of dollars each. The community groups are urging state regulators to do an independent fair market valuation of all of the Regence nonprofit assets (including the Regence name and trademark) and to ensure that HCSC pays full price for its takeover of Regence. “This could be the single greatest loss of healthcare funds ever to hit the northwest,” Gorham said. “This looks like a giveaway, and the people of these four states are being left out of the deal.”
When a nonprofit Blue Cross or Blue Shield plan is sold or changes from a nonprofit to a for-profit, the law requires that the full value of the company be set aside in an independent public health foundation. This is done to protect the public’s investment in the nonprofit health insurer, and to ensure that those funds continue to be used for public health projects in the state. As a result, over the past decade, $7.4 billion has been set aside for community health projects in 13 states and the District of Columbia.
Currently, in New Mexico, HCSC is buying the nonprofit Blue Cross Blue Shield plan and the proceeds, possibly $20 million dollars, will go to a New Mexico charitable healthcare foundation. While HCSC refers to the New Mexico deal as an “affiliation, ” it is paying for the New Mexico plan. “The people of New Mexico will get a healthcare foundation once regulators finalize the HCSC/New Mexico Blue Cross and Blue Shield deal.” Regulators should demand no less in the Regence states,” said Gorham.
Enclosed are the letter sent by Oregon Health Action, Washington Citizen Action and the Idaho Community Action Network to state regulators, a legal memorandum from consumer groups to state regulators, and a fact sheet. A copy of the Regence filing and a more extensive memorandum outlining issues raised by the filing are available upon request.

Consumers Union West Coast Regional Office
(415) 431-6747