December 9th, 2020

Dear Assemblyman McKeon,

We write to express our concern over A5119, the Horizon reorganization bill that you introduced this month. In its current form, the bill would enable the transformation of Horizon Blue Cross Blue Shield, a unique non-profit health services corporation created for the benefit of New Jersey residents, into a mutual holding company with for-profit subsidiaries that would no longer operate solely for the benefit of its members and the public, and so might circumvent Horizon’s obligations to the public

Under existing law, in the event Horizon converts to a for-profit entity, the fair market value of its assets must be transferred to a charitable trust for the benefit of the public.  The reorganization contemplated by the proposed bill would in effect bring about such a conversion, even though the bill declares otherwise, triggering the charitable trust settlement obligation. Horizon has an estimated $7 billion in assets but the proposed bill requires Horizon to pay just $600 million up front and as much as an additional $625 million over the next 17 years. Further, there is no requirement in the bill that the monies that Horizon does pay will be used to improve public health. 

If an amended version of this legislation is to become law, it must ensure that any transfer or sale of Horizon assets from new for-profit subsidiaries triggers a commensurate charitable trust payment to the state. As under current law, the signoff of the Attorney General must be required before any restructuring is approved. The essential protections of public assets codified in the 2001 conversion law must not be effectively nullified, as in the draft legislation.

We are troubled not only by what this bill does but also by the speed and lack of transparency with which it is being pushed through, during the holiday season in the midst of a growing pandemic, with passage envisioned as soon as the middle of this month. The Assembly Financial Institutions and Banking Committee held an initial hearing on December 1, before the bill had even been filed, at which the public was not allowed to testify. Instead, the four-hour hearing showcased the testimony of Horizon executives, a Horizon lawyer and a Horizon consultant. Only two non-Horizon advocates were given time to speak toward the end, when only roughly half the committee were still present. We are told that same committee will hold two more hearings, one on December 10, with more invitation-only testimony, and another on December 14, when the public finally gets to weigh in, with the committee expected to vote on the bill that same day, allowing little or no opportunity to make amendments based on public input. An Assembly floor vote is possible as early as December 17, just three days after that.  Even aside from the content of the bill, this process is not truly democratic in the small “d” sense of the word.

At a minimum, the process must be slowed down to allow more opportunity for  public input and for a fuller understanding of the likely consequences of this reorganization, given that billions of dollars are at stake and there is a need to ensure that the mission of Horizon, which insures about 3.6 million New Jerseyans, is not negatively impacted by the change in form.  We recognize that at a time when the pandemic has put New Jersey and all other states under intense fiscal pressure, the $600 million up-front payment and additional amounts that Horizon is provisionally committed to pay the state over the next 17 years makes the conversion a tempting expedient. But some $7 billion in public assets should not be traded away cheaply.

The pandemic places a grave responsibility on lawmakers to extend and improve access to quality health care for all the state’s residents. That responsibility cannot be met by creating a path to privatizing billions of dollars of public wealth. At a time when our state is moving toward expanding access to affordable and community-based healthcare, this legislation should ensure that any changes to Horizon’s structure furthers those goals.

Signed,

SOMA Action

NJ 11th for Change

BlueWaveNJ

Our Revolution Essex County