Profit Motive

Colorado's legislature is looking to emulate California. But elsewhere, Blues are fighting to hold on to their hoards even as they turn capitalist. In Georgia, they've won: thanks to a Blue-backed law passed by the legislature, 160,000 policyholders of Blue Cross and Blue Shield of Georgia will each get five shares of stock-value still uncertain-in the for-profit Blue, but the company will hold on to the $140 million in its treasury. Virginia's Trigon Blue Cross Blue Shield had the same idea, until a Richmond newspaper revealed that Trigon had hired the law firm of the state senate majority leader. The embarrassed company then agreed to hand over $175 million--its net worth at the time it lost its tax exemption eight years ago -to Virginia: s general fund.

The next battle will be in Ohio. On March 29 Columbia/HCA, the nation's largest hospital company, agreed to buy 85 percent of Blue Cross & Blue Shield of Ohio's business. It's an unprecedented marriage. But check the prenuptial agreement. If regulators sign off, a small nonprofit insurance company will survive as Ohio Blue. That company--already quite healthy, thank you--would get Columbia's cash. Policyholders would get nothing. And even though Ohio Blue had a tax exemption until the mid-1980s, the public wouldn't see a cent of the $400 million buyout. "It doesn't come up because we're a taxpaying company," says spokesman William Silverman. So who'd be better off from the sale of this nonprofit's assets? Mostly, it seems, Ohio Blue's execs, several of whom would get jobs, consulting contracts or cash for agreeing not to work for competitors,

Other Blues' plans are carefully eying the action-and regulators are nervously eying the Blues. Colorado's Ehnes blocked Colorado Blue's for-profit ambitions until the company rescinded a plan, which had been secret, to reward executives with big bonuses as soon as the company sells stock. In New Mexico, where Blue Cross may try to switch to for-profit status next year, Insurance Commissioner Chris Krahling insists that it start giving patients a share of discounts it gets from doctors and hospitals. In Missouri, Commissioner Jay Angoff warns that Missouri Blue Cross is surreptitiously becoming a for-profit company. "The value of the nonprofit belongs to the public," Angoff insists. Not so, rejoins CEO Heimburger--and in any case, he adds, the state has no claim on the company's assets. Who does? The folks who built the Blues six decades ago worried more about treating patients than controlling assets. In the age of managed care, their successors don't have that luxury.

Who Gets the Money?

As the Blues go for-profit, states must divvy up billions in assets.