Insurer pushes plan to go public

A giant downstate nonprofit health insurer is pushing to become a publicly traded venture, making so
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A giant downstate nonprofit health insurer is pushing to become a publicly traded venture, making some Capital Region doctors concerned that the proposed conversion will encourage company executives to view patients as cash cows.

The state Insurance Department on Thursday hosted its second public hearing on EmblemHealth’s proposal to become a for-profit insurer. Emblem is the New York parent company of Group Health Inc. and the Health Insurance Plan of Greater New York.

Saying they are financially outgunned in the increasingly for-profit downstate health insurance market, Emblem executives said they need access to public capital to make necessary investments in technology, products and services. Their first public hearing was held in New York on Tuesday.

The bid to go public is the latest evolution for GHI and HIP, which in 2005 announced plans to merge. Since then, they have affiliated under Emblem. The health plans date back to 1937 and 1947, respectively.

Together, GHI and HIP cover more than 4 million New Yorkers, including 321,000 in the Mid-Hudson Valley and Capital Region. Many of those members are state workers and retirees who receive behavioral health and dental coverage.

“Our future stability depends on our ability to compete,” said Emblem Chairman and Chief Executive Officer Anthony Watson.

As a nonprofit, Emblem’s options for capital project financing is limited to taking it from surplus funds or borrowing. That corporate structure puts Emblem at a significant disadvantage to for-profit competitors, such as Aetna, Cigna and United Healthcare, according to company officials.

As a public company, Emblem would have access to the equity capital markets that could furnish it with vastly more funding avenues.

But area physicians expressed skepticism about the motives behind Emblem’s privatization bid. They warned the needs of shareholders could trump those of patients if the insurer went public.

Emblem President and Chief Operating Officer Frank Branchini said public capital would enable the insurer to improve its customer services, though he also said the company would reduce its workforce, mostly through attrition.

“My patients expect me to take care of them, not to make a profit off of them,” said Dr. Paul Sorum, chairman of the Albany chapter of the Physicians for a National Health Program.

The last New York nonprofit health insurer that became a for-profit company was Empire Blue Cross Blue Shield. But three years after its initial public offering in 2002, Empire parent WellChoice was acquired by WellPoint, an Indianapolis-based rival with 34 million members nationwide.

WellPoint, United, Aetna and Cigna now control 72 percent of downstate’s commercial market. Throughout New York, for-profit insurers control 50 percent of that market.

Emblem’s downstate market share is 19 percent and it is 12 percent statewide. Its proposed merger and privatization drew the support of the New York Health Plan Association, an Albany trade organization that represents 30 health plans.

“They’re trying to survive in a for-profit market,” said Health Plan Association President Paul Macielak.

As a for-profit insurer, Watson said Emblem would broaden its coverage statewide and attempt to wrangle from the Minneapolis-based United a contract to serve as the administrator of the Empire Plan, the main health plan for state workers.

Insurance Department Superintendent Eric Dinallo would be “sounding our death knell” if he rejects Emblem’s proposal, Watson said.

However, Dr. Arnold Ritterband, chairman of the Schenectady County Committee of Health Care Issues and co-medical director of the Schenectady Free Health Clinic, said public health insurers are dooming quality care for patients. He said the merger and privatization of GHI and HIP would put too much emphasis on profits. He also noted the $10 million-plus salaries for chief executives at insurers such as United and Aetna.

“The more corporatized medical care has become, the more compromised it has become,” said Barbara Doty, a Thompson Lake, Orange County, resident whose 23-year-old son is awaiting his third kidney transplant.

Although Doty’s son is not covered by GHI or HIP, she has grown frustrated with the prevalence of a bottom-line mentality at hospitals and health plans.

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