Blue Cross For-Profit Conversion Plans Ruled Illegal

In a ruling that could curb efforts by Blue Cross plans to become profit-making companies, a judge said Missouri’s plan broke the law when it shifted most assets to a for-profit subsidiary.

State Judge Thomas Brown III ruled late Monday that Blue Cross and Blue Shield of Missouri abused or exceeded its authority when it transferred 80 percent of its assets to Rightchoice Managed Care Inc. two years ago.

Brown could order the company dissolved or take Blue Cross’ assets for the public’s benefit. He put off a decision pending an appeal by the company.

Although his ruling affects only Missouri, it was the first such decision in the country and drew praise from consumer groups who said it would influence others.

“The message for non-profits across the country is that you cannot take public money and use it to benefit private interests without violating the law,” said Julie Silas, an attorney for Consumers Union, publisher of Consumer Reports magazine.

Blue Cross and Blue Shield of Missouri contended its actions were legal. While the appeal is heard, the company’s status and its health insurance coverage won’t change.

Most of the more-than 60 independent Blue Cross-Blue Shield health insurance plans are not-for-profits, which gives them special tax breaks and, usually, an obligation to provide some benefits for the poor.

A number of plans are converting to for-profit companies. They contend it’s the only way to remain competitive with big multistate for-profit health maintenance organizations that are rapidly stealing customers with lower rates.

In his ruling, however, Brown said Blue Cross’ contention that the reorganization was necessary for the survival of the company “lacks factual support.”