Political pressure is building on state regulators to slow the proposed purchase of Blue Cross and Blue Shield of Louisiana by Elevance Health, with state lawmakers on Wednesday raising concerns about the deal's potential effect on health insurance costs and Attorney General Jeff Landry pressing for a delay in the approval process.
During a nearly six-hour legislative hearing, lawmakers grilled Blue Cross officials over the terms of the $2.5 billion deal announced earlier this year to sell the Baton Rouge-based nonprofit and create a multi-billion-dollar foundation with the proceeds.
Lawmakers pointed to a critical report on the deal from an actuarial firm hired by Insurance Commissioner Jim Donelon, which was posted on the Insurance Commission's website shortly before the hearing began.
Three Republican state senators said they would ask Donelon to consider delaying regulatory hearings currently scheduled for next week, a point echoed in a letter from Landry, the current Republican front-runner in the race for governor, who said he has opened an investigation into the deal for potential anti-trust violations.
Landry said he does not have a position on the sale yet. But his letter cited concerns about how the deal could impact premiums, how proceeds will be split between policyholders and the foundation that will result from the purchase, and whether creating a large foundation is in the best interest of the people of Louisiana.
“Very little is known as to how the foundation will operate,” Landry’s letter said. “I understand this kind of transaction can be beneficial...but it is too early to make that determination.”
No changes...for now
The hearing Wednesday underscored the difficult road that Blue Cross and Elevance may face in trying to sell the proposed acquisition in coming weeks. By law, Donelon, along with two-thirds of Blue Cross policyholders across the state, must approve the deal in a multi-step process.
Two days of hearings on the proposal, which are required for the sale of the nonprofit Blue Cross to the for-profit Elevance to go through, are scheduled for August 21 and 22.
In recent weeks, some policyholders, public policy advocates and politicians have raised concerns about the way the sale to Elevance is structured. They've asked tough questions about how the Blue Cross board determined that policyholders will get slightly less than 10% of the sale proceeds while the rest will go into a nonprofit foundation that will be controlled by four current Blue Cross board members.
“I think you should consider delaying this,” state Sen. Barrow Peacock, R-Shreveport, told Donelon’s executive counsel, David Caldwell. “You’re just making this expert opinion available to the public two business days before the hearings. People need more time to digest this.”
State Sens. Jeremy Stine, R-Lake Charles, and Robert Mills, R-Minden, also said they will press for a delay.
For now, Caldwell said the hearings scheduled for next week will move forward as planned and that the department has all the background information it needs to begin asking questions in a public forum about whether the deal is in the best interest of policyholders and the state.
“This plan was filed in January,” Caldwell said. “We have set a hearing date and we are ready to go. The commissioner doesn’t want to punt on this. I don’t know what waiting another three or four months is going to do.”
Benefits for policyholders
State legislators do not have any official say in the deal, but the hearing nevertheless set the stage for the issues that will be at play in the upcoming regulatory reviews.
For much of the hearing, Blue Cross CEO Dr. Steve Udvarhelyi defended the insurer’s plans.
He reiterated that it’s the best way to bring digital technologies, better pharmacy benefits and new programs to customers of Blue Cross, which is finding it harder to compete against large companies in the increasingly complex, expensive health care industry.
"There will be no changes. There will be no layoffs," Udvarhelyi said of the deal. "But if we do not something now to secure our future, the forces at play in the marketplace, the inevitable forces of consolidation, will happen and we will have to consolidate from a position of weakness. We believe we are in a unique moment in time."
He also reiterated his pledge that Blue Cross customers will not see a change in their premiums or in the doctors and hospitals that participate in their plans.
But Stine challenged that assertion, pointing to Blue Cross documents that show those guarantees are only good “through the current contract period.”
“That’s only four more months of this year,” Stine said.
Actuary report
Most of the concerns, however, focused on two independent reports posted to the Department of Insurance website Tuesday and early Wednesday.
One, by consulting firm Rector, the other, by a Kansas actuarial firm, Hause Actuarial Solutions, question the way Blue Cross intends to structure the deal.
Blue Cross has proposed giving a fraction of sale proceeds to policyholders. That group is made up of employers and some people who have purchased plans individually, and not every person in the state covered by Blue Cross.
The policyholders would receive $307 million, a figure that translates to about $3,000 per policyholder.
The rest will go to the foundation, Accelerate Louisiana, along with an additional $1 billion or so from Blue Cross reserves.
Udvarhelyi and others have said the value of a policy is not the same thing as owning a share of a company and that policyholders are not entitled to profits from the sale, but only what their voting rights are worth.
Blue Cross financial advisers, including investment banking firm Chaffe & Associates, determined the value of those voting rights.
But the Hause report takes issue with Chaffe's findings, questioning the fairness of the deal and saying that policyholders "are being deprived of their rights" under their contract with Blue Cross.
Caldwell acknowledges that the department’s own consultants have raised some serious issues and said the commission will be taking a close look at them.
“I understand Blue Cross logic, but our experts do not agree with them," he said. “The commissioner has not made up his mind and has a lot to consider. He also has options. He could approve this deal but only with certain conditions or restrictions.”
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