New Jersey’s biggest health plan, Horizon Blue Cross Blue Shield, has applied to the state to convert to for-profit status. As discussed by the Philadephia Inquirer, the state will likely require Horizon BCBS to disgorge its retained earnings into a charitable foundation that will fund expanded health care – as dictated by the state.
Well, that’s the bad news: more politically determined health care spending, as if we didn’t have enough of that already! On the other hand, Horizon BCBS will have access to capital markets, which will allow it to grow faster. (One thing that I find remarkable is how advocates of government-monopoly health insurance claim that health plans’ profits subtract from actual health care paid for and delivered. They conclude that taxpayer-funded health insurance would provide “universal” health care. In fact, the opposite is true: there is really no way that the massive current amount of health spending in the U.S. could be supported solely by taxation. The very high level of spending on actual health care requires the capital markets to finance it. The profits are the return to capital for supporting that spending.)
I’m all in favor of the conversion, but I’m a little surprised by the CEO’s comment: “You’ve got to have the right products and those products have to be priced competitively.” Well, ok, but that doesn’t quite jibe with the fact that Horizon BCBS has a whopping reserve of $2.5 billion, on revenue of $7.5 billion.
How come no competitors, either non-profit or for-profit, have entered the market at lower premiums and chipped away at those huge retained earnings? Readers familiar with the U.S. Index of Health Ownership know the answer: New Jersey is not a competitive market for health insurance. Instead it is grossly overburdened with regulations.
Instead of scrapping over the loot of Horizon BCBS’s conversion, New Jersey’s politicians should be looking at making health insurance more competitive.
Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.
Questions about a Blues For-Profit Conversion in New Jersey
John R. Graham
New Jersey’s biggest health plan, Horizon Blue Cross Blue Shield, has applied to the state to convert to for-profit status. As discussed by the Philadephia Inquirer, the state will likely require Horizon BCBS to disgorge its retained earnings into a charitable foundation that will fund expanded health care – as dictated by the state.
Well, that’s the bad news: more politically determined health care spending, as if we didn’t have enough of that already! On the other hand, Horizon BCBS will have access to capital markets, which will allow it to grow faster. (One thing that I find remarkable is how advocates of government-monopoly health insurance claim that health plans’ profits subtract from actual health care paid for and delivered. They conclude that taxpayer-funded health insurance would provide “universal” health care. In fact, the opposite is true: there is really no way that the massive current amount of health spending in the U.S. could be supported solely by taxation. The very high level of spending on actual health care requires the capital markets to finance it. The profits are the return to capital for supporting that spending.)
I’m all in favor of the conversion, but I’m a little surprised by the CEO’s comment: “You’ve got to have the right products and those products have to be priced competitively.” Well, ok, but that doesn’t quite jibe with the fact that Horizon BCBS has a whopping reserve of $2.5 billion, on revenue of $7.5 billion.
How come no competitors, either non-profit or for-profit, have entered the market at lower premiums and chipped away at those huge retained earnings? Readers familiar with the U.S. Index of Health Ownership know the answer: New Jersey is not a competitive market for health insurance. Instead it is grossly overburdened with regulations.
Instead of scrapping over the loot of Horizon BCBS’s conversion, New Jersey’s politicians should be looking at making health insurance more competitive.
Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.