Taken from Insider NJ
December 13, 2022
New Jersey Citizen Action (NJCA) and Health Professionals and Allied Employees (HPAE), in an effort to safeguard millions of policyholders, filed suit yesterday to halt Horizon Healthcare Services, Inc.’s plan to reorganize into a mutual holding company, and immediately transfer $900 million out of the reorganized insurance companies. The legal challenge to block the deal is an appeal of a November 1, 2022 order by the New Jersey Department of Banking and Insurance (DOBI) Commissioner Marlene Caride approving the proposed reorganization of the state’s biggest health care insurer.
“We’re filing this suit to protect the insurer, to ensure the entity’s charitable assets are properly used and protected, and to protect millions of New Jersey health care policyholders,” said Maura Collinsgru, Director of Policy and Advocacy for New Jersey Citizen Action.
NJCA and HPAE, both policyholders of Horizon and organizations that represent health care consumers and health care workers, testified during public hearings that the reorganization plan may not sufficiently protect the health insurer’s charitable assets and that millions of policyholders throughout New Jersey could be negatively impacted.
The lawsuit’s most salient points contend that:
- There was a failure to provide required notice to all policyholders about the proposed reorganization.
- DOBI’s order does not meet the legal standard of ensuring the reorganization would benefit Horizon’s policyholders.
- DOBI’s order concludes, contrary to the evidence, that policyholder premiums would not be increased as a result of the reorganization.
- DOBI’s order misused a regulatory solvency tool in making its determination, and failed to scrutinize the investments Horizon intends to make in the newly formed mutual holding company. Yet, the department determined that Horizon’s plan would “benefit the interests of the policyholders and not treat them inequitably.”
“The state of New Jersey is putting policy holders at risk without doing due diligence to ensure this move by Horizon Blue Cross Blue Shield, our biggest insurer, is in their best interests,” HPAE President Debbie White, RN, said. “We believe the Banking and Insurance Department has moved too quickly and that this decision should not be rushed. We must have all the necessary information before making a determination that this is a sound move.”
The lawsuit contends that Commissioner Caride applied the wrong legal standard when the DOBI order determined Horizon’s plan was not “contrary to the interests of the policyholders”; the actual standard is that it “benefit the interests of the policyholders.”
The lawsuit also noted that the Commissioner determined Horizon’s reorganization would not result in higher premiums despite Horizon itself testifying repeatedly that higher taxes lead to higher premiums. Under its plan, Horizon will immediately pay out $900 million–-a $600 million tax that is nine times higher than usual, and $300 million having a similar financial impact.
“Horizon can’t have it both ways,” said Collinsgru. “Horizon testified repeatedly that higher taxes drive up premiums and the Commissioner agreed. Given the high increases policyholders are already suffering, the reorganization’s payouts will drive up premiums by Horizon’s own logic even higher for millions of New Jerseyans.”
Finally, NJCA and HPAE contend that DOBI’s order misused the Risk-Based Capital tool in determining the financial soundness of the proposed insurers, resulting in an overstatement of Horizon’s financial strength after the reorganization, and ignoring the impact of giving up nearly a third of its capital. Horizon’s proposed specific investments were not sufficiently scrutinized, and Commissioner Caride determined that Horizon was not even required to prove that it needed the reorganization to make the new investment it claimed justified the reorganization.
“New Jersey Appleseed, in conjunction with NJCA, has for decades sought to protect the interests of Horizon’s policyholders and the public’s interest in its charitable assets,” said Renee Steinhagen, Executive Director of New Jersey Appleseed. “Based on the opinions of relevant experts, we have filed this action because we believe the Commissioner’s decision to approve the reorganization was arbitrary and capricious, and violated state law.”