MIAMI (CBSMiami/AP) — A restructure has been approved for health insurance giant Florida Blue.
State insurance officials ruled Friday to allow the changes.
Florida Blue will restructure itself under a not-for-profit mutual insurance holding company.
But the Office of Insurance Regulation’s order prohibits Florida Blue from selling stock to investors outside of the group.
Company officials said the restructure will help Florida Blue expand assets outside the insurance industry and get them to the market more quickly, hinting that the Jacksonville-based Florida Blue will likely be acquiring other companies. The company stressed in a statement Friday it had no plans to sell stock publicly.
Critics have warned the move could create a conflict between turning a profit for shareholders and the obligation to provide low-cost insurance to its more than 4 million policy holders if the company felt pressure to raise rates. At a public hearing in Miami last month, regulators also expressed concerns that the restructure could dilute policy holders’ ownerships interests.
The proposed reorganization creates a new parent company or a mutual insurance holding company, which would oversee all subsidiaries, including the insurance company.
Florida Blue’s current policy holders would control ownership of the new parent company and own all stock created in the restructure.
State insurance officials did not approve a demutualization, meaning Florida Blue can’t sell stock to outside investors. But the company can transfer assets from Florida Blue to a new non-insurance stock company.
At last month’s hearing, Florida Blue officials did concede they could take the company public if needed, but CEO Pat Geraghty promised critics that neither he nor his board of directors will own stock in Florida Blue and that executive compensation will not change. Geraghty earned $6.8 million in 2012, according to state filings.
The Florida Times-Union previously reported the state’s top insurance regulator originally opposed the move amid concerns the restructure “may not adequately protect the interests of the policyholders.”
The Florida Alliance for Retired Americans urged state insurance officials to reject the proposal, warning it was not in the best interest of policy holders.
“Is it appropriate for Florida Blue to propose to policy holders that they would legally become a for-profit stock company, but that Florida Blue would remain a non-profit insurer but with the caveat that it could possibly become a for-profit insurer in the future? This is quite bizarre,” the group said in a letter to the state.
Florida Blue members must still vote for final approval of the deal. A vote is tentatively scheduled for September 10th.
“This is an important decision,” Commissioner Kevin McCarty said in a statement. “Members should educate themselves on the details and exercise their right to vote on this transaction.”
Geraghty said the company wants to change its mission from simply paying health claims on the back-end to working to keep people healthy in the first place.
For example, Florida Blue currently has 11 retail centers around the state where customers can purchase insurance, ask about a claim or get their blood pressure checked. Those retail centers will likely get more traffic because of the Affordable Care Act’s provision requiring individuals to purchase health insurance. Florida Blue wants to capitalize on that business, selling vitamins, fitness gear and other non-insurance related items.
Florida Blue, which is currently an independent licensee of the Blue Cross Blue Shield Association, is a political heavyweight in the state with nearly $5 million in campaign contributions during the 2012 election.
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