Horizon BCBS Impasse May Shut Down NJ Government

UPDATE: New Jersey Governor Chris Christie declared a state of emergency shutting down all non-essential government services as of 12:02 am ET July 1. The order came after Assembly Speaker Vincent Prieto posted the state budget for the second time in 2 days, and failed to get enough votes. The board stayed open for members to change their votes for more than 4 hours Friday evening until midnight, with Prieto telling members they must report on 2 hours' notice if an agreement is reached to reopen state government. Prieto had appeared with union members earlier in the day to repeat his refusal to post S-4, which concerns Horizon Blue Cross Blue Shield. Christie held a press conference Friday saying he would execute a budget "tonight" that would cancel spending priorities, using his line-item veto power, if the package did not include the bill concerning Horizon governance.

This story is based on Legislative action Thursday.

A plan to give regulators more control over New Jersey’s largest health insurer caused an impasse in the legislature Thursday, blocking passage of the $34.7 billion state budget.

With the fiscal year set to expire at midnight, state government could shutter over the busy July 4 weekend—closing parks and idling non-essential workers—unless a deal is reached to give Governor Chris Christie, a Republican, what he wants from Horizon Blue Cross and Blue Shield (BCBS).

Horizon, a not-for-profit that covers 3.8 million people and has 49% market share, has vigorously fought Christie’s plan since February. What began as a request for $300 million in surplus has morphed into an overhaul of the insurer’s governance, board, and mission. The Blue Cross Blue Shield Association said the plan would make Horizon an arm of the state and cost the insurer its “Blue” license.

Christie isn’t budging. He called a late press conference to say he won’t make a budget deal without S-4, which passed the state Senate Thursday with the minimum 21 votes. Democratic Assembly Speaker Vincent Prieto refused to post the bill, and that could cost him his job.

“I have a bipartisan deal with the Senate,” Christie said, referring to Democratic Senate President Steve Sweeney. “If government closes, it closes.”

"My position hasn't changed and won't change. The only obstruction left is the speaker, who, for some reason, has decided that the interests of a multi-billion dollar insurance company are more important to protect than the people's ability to have their government remain open," Christie said. He claimed that the Assembly speaker “is playing a very dangerous game.”

Late Thursday, Sweeney told POLITICO New Jersey that the Horizon bill could be repealed after Christie leaves office. But for now, the governor’s Constitutional powers give lawmakers few options.

(1) Reconfigure the insurer’s board, with 3 members elected from Horizon subscribers,

(2) Require more disclosure of financial information, including executive pay, and

(3) Create a “public process” that gives the Banking and Insurance Commissioner final say on whether Horizon has “excess surplus.” If the Commissioner finds this is so, Horizon would be required to spend some surplus funds on public health programs.

The bill targeting Horizon would:

Minutes before the Senate opened debate on S-4, Prieto was forced to abandon a vote on the state budget when it received just 24 votes, well short of the 41 needed for passage—even though the plan is loaded with election year goodies. Thirty-five Assembly members did not vote after Prieto refused to post the Horizon bill.

“To be clear—the budget bill has nothing to do with the reworking the state’s largest health insurer in 4 days, for no apparent reason, during a time when Trumpcare threatens millions of Americans,” Prieto said in a statement Thursday morning. “The Horizon bill is an unfair Christie tax on the insurer’s 3.8 million policyholders. I will not negotiate on that bill as part of the budget process.”

Sweeney, meanwhile, has said he’s trying to find a compromise to keep government open. The only person who spoke in favor of the Horizon plan during floor debate was its sponsor, Senator Joseph Vitale, who is well-regarded as both a healthcare expert and a voice for the state’s poor.

“This legislation doesn’t do any of the things that those who oppose it say that it does,” Vitale said. “What it does do is reaffirm what their mission is.” The bill spells out Horizon’s charitable obligations and restores its status as the “insurer of last resort.”

Vitale discussed the process in which state insurance regulators would establish a lower and upper target range for Horizon’s surplus; if the insurer’s surplus exceeded the upper end of the range, the insurer would be asked to put at least some of the excess into a “wellness fund,” and Vitale said Horizon could work with the state to direct its use.

Vitale has said the plan would work like the regulatory structure in Pennsylvania, which calls for a risk-based capital (RBC) range of 550% to 700%. However, the New Jersey bill does not include specific RBC ranges—or even define “excess” surplus. This has alarmed both Horizon and veteran business leaders, who have spent decades watching legislators make off with unemployment taxes and other “dedicated” funds that were no match for a process that allows “budget language” to override statutory good intentions.

Horizon fears shipping its surplus to other uses will force higher premiums. Sweeney has promised this will not be the case.

Two Republican senators who opposed the bill Thursday—including 1 who said he supported more oversight of Horizon—said if the insurer has too much surplus, it should go to policy holders, not a “wellness fund.”

One Republican, Senator Jennifer Beck, said the bill lets the commissioner force Horizon to hand over surplus funds on 60 days’ notice, even if there are disagreements over the amount or how it should be used. “There is no recourse,” she said. “Turn over the surplus to the State of New Jersey—now—and we’re going to figure out how to spend it! That is wrong.”

Democrats have noted that while transparency portions of the bill take effect right away, the surplus management won’t kick in until next February, after Christie leaves office. At his press conference, Christie said the fact that he can’t spend Horizon’s money has no bearing on why he’s made it his cause. “That’s not why I did it,” he said.

He claimed that the only profit Horizon had generated in the past 2 years was from Medicaid and from investment income “from their capital.”

“The money that is excess in profit is being returned to where it should be returned—to the taxpayers,” the governor said.

Horizon did not immediately respond to a request for comment about Christie’s statement.

A former New Jersey Banking and Insurance Commissioner, Holly Bakke, disagreed with Christie’s characterization of the surplus. Bakke, who was the director of New Jersey’s Guaranty Association and has 30 years’ experience in solvency regulation, said, “The insurer’s reserves are consistent with industry standards, are smaller on a risk-adjusted basis than those of most other state Blue Cross and Blue Shield insurers and meet New Jersey’s solvency requirements that are predicated on consumer protection.”

All About Christie’s Budget Powers

Absent a budget deal the includes the Horizon plan, Christie said he would use “all the Constitutional authority I have” to leave legislators with a budget that cancels many of their priorities—which could mean wiping new school funds that some suburban towns have sought for more than a decade. New Jersey’s Constitution gives the governor a powerful “line-item” veto to cancel out individual spending items after the legislature passes the annual budget.

The governor’s ability to cancel spending priorities is one reason Sweeney has sought a compromise. Multiple published reports have also suggested that the Horizon plan would benefit the insurer Amerihealth, which has ties to Cooper University Hospital in Camden, NJ, and its board chairman, George Norcross, a Sweeney ally.

The Horizon battle has created a series of odd alliances: supporting Horizon are all major business groups and labor unions, from publisher Steve Forbes to AFL-CIO President Richard Trumka. Both candidates running to succeed Christie—including his Lieutenant Governor Kim Guadagno—have asked why the bill is being rushed through so quickly. But as Christie noted himself, he had support Thursday from Democratic Senate Majority Leader Loretta Weinberg, a key instigator of the Bridgegate scandal, whom the governor famously said the media should take the bat out on years ago.

Horizon officials have seemed shocked at the personal nature of Christie’s attacks and baffled that the governor is targeting them after saying little about the insurer for 7 years. At today’s press conference, for example, Christie made fun of a Horizon lobbyist for Thursday's Senate vote and read his salary out loud.

More interesting are the positions of Vitale and Weinberg, both respected veterans whose words carry weight with fellow Democrats. In a blog post Sunday, Weinberg wrote, “Some of the components in Senator Vitale’s bill have been discussed by Democrats for years.”

In 2015, Horizon launched a controversial tiered health plan called OMNIA, which came with no warning and relegated many urban hospitals to less favorable status. Vitale and fellow Senator Nia Gill held a marathon hearing in October 2015 and filed a complaint with New Jersey’s Attorney General, but they were not able to stop the OMNIA plan. Gill voted against S-4 yesterday, saying it was not transparent.

Some observers speculated that lingering wounds over the way OMNIA was handled, while not the cause of Christie’s attacks, helped create the atmosphere for Thursday’s vote.