Health Plan Conversion

Health plan conversion regulations first arose in the context of permitting HMOs to convert to for-profit status, which began to happen extensively during the 1980’s. Health plan conversion regulations aimed at Blue Cross Blue Shield were enacted after Blue Cross and Blue Shield Association voted in 1994 to permit their members to convert to for-profit status. These statutes were prompted by early Blue Cross and Blue Shield conversions that occurred without foundations being created. In California, Georgia and Kentucky, foundations were created only after post-conversion negotiations and/or consumer-led lawsuits, prompting other states to enact legislation that would ensure adequate oversight of such conversions and an appropriate disposition of non-profit assets.

These statutes clarify who has authority to oversee transactions, re-emphasize the obligation to preserve charitable assets, establish explicit criteria by which to evaluate the merits of a conversion, establish procedures to ensure a better informed public and in some cases may authorize on-going structures or obligations on the converted company. The Duke Center for Health Policy has developed a draft working paper assessing the costs and benefits of health plan conversion regulations.

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