Lawsuit seeks to block Horizon Blue Cross Blue Shield reorganization

The filing by New Jersey Citizen Action and Health Professionals and Allied Employees claims the state Department of Banking and Insurance erred when it found the reorganization would not lead to higher insurance premiums. The plaintiffs allege the reorganization failed to comport to a 2020 law enabling Horizon's move to a new corporate structure.

"The state of New Jersey is putting policyholders at risk without doing due diligence to ensure this move by Horizon Blue Cross Blue Shield, our biggest insurer, is in their best interests," said HPAE President Debbie White.

A spokesperson for the Department of Banking and Insurance declined to comment.

As part of Horizon's reorganization, the insurer in June paid the state $600 million to make up for a $50 million reduction in its annual tax burden. It will pay an additional $625 million over the next 17 years.

The firm additionally won approval to spend $300 million on the creation of for-profit subsidiaries and other investments, including in medical practices. Horizon itself would remain a nonprofit.

The plaintiffs claim those payments and the $300 million in spending are functionally a tax increase that will push premiums upward.

"Horizon can't have it both ways," said Maura Collinsgru, director of policy and advocacy for New Jersey Citizen Action. "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."

Horizon, the largest health insurance firm in the state and the biggest nonprofit of its kind in New Jersey, has said the reorganization of its corporate structure would allow it to reduce its tax burden and remove regulatory hurdles that it said made it unable to compete with for-profit insurers.

At a hearing in October, Horizon general counsel Jennifer Velez told state officials the move to a mutual holding company would allow the insurer to shed limits on investment size, avoid a unique tax on premiums, and remove caps on revenue from certain services, including Medicaid.

A spokesperson for Horizon declined to comment on the suit, to which the insurer is not a party. The insurer has roughly 3.7 million policyholders and administers health benefits for public health plans that cover more than 800,000 state, local, and county government workers.

Horizon has recently faced criticism from local and union officials over premium increases in excess of 20% for the State Health Benefit Plan.

The suit also questions the propriety of the department's finding that the reorganization would benefit Horizon's policyholders, as the legislation enabling the structural shift requires.

A health impact study conducted by consultant Manatt Health that was released after the state's banking and insurance commissioner, Marlene Caride, approved Horizon's reorganization found the restructuring is in line with the law.

Caride's department faced criticism for the breakneck pace at which it approved Horizon's transformation into a mutual holding company.

The enabling legislation requires the department to hold three public hearings on the reorganization within a 90-day span. The hearings followed a far tighter schedule, with all three held during a two-week period in October. Caride approved the restructuring on Nov. 4.

"We believe the Banking and Insurance Department has moved too quickly and that this decision should not be rushed," White said.