ROANOKE TIMES
Copyright (c) 1995, Roanoke Times
DATE: Friday, December 8, 1995 TAG: 9512080083
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
DATELINE: RICHMOND
SOURCE: DAVID M. POOLE STAFF WRITER
Attorney General Jim Gilmore on Thursday dropped his opposition to Trigon Blue Cross Blue Shield's bid to become a for-profit company after the insurer agreed to donate $159 million to a charitable foundation.
With that negotiated agreement, the public would reap some of the benefits that Trigon received as a tax-exempt organization, Gilmore said.
But consumer advocates said the arrangement would shortchange citizens because the donation represents roughly 10 percent of the company's potential value as a stock company. In a similar case in California, Blue Cross Blue Shield gave $3 billion to charity.
"We appreciate the fact that the attorney general and Trigon believe the company has a public obligation, but ... the amount is off target," said Jean Ann Fox, director of the Virginia Citizens Consumer Council.
The $159 million provided by Trigon would endow a foundation dedicated to higher education, medical research and health care education.
Trigon's ability to mollify Gilmore, who in recent months had used the insurer as a consumer whipping post, is a major step in the company's for-profit application with the State Corporation Commission.
Trigon, the state's largest insurer, wants to sell stock so it can raise capital and compete better in its ever-changing health care industry. Trigon has suggested the stock could be valued between $1 billion and $1.75 billion. Public hearings on the application could take place as early as next spring.
Gilmore, a conservative Republican who is expected to run for governor in 1997, grabbed headlines in recent months by taking the corporate giant to task for deceptive billing practices, and management that he described as insensitive to consumers.
Gilmore said Thursday the agreement worked out between Trigon and his staff is a sign of good faith. He noted that a charitable foundation set up to administer the $159 million would nominate two of the 19 Trigon directors, giving the public a voice on the company's board.
The settlement figure was based on the surplus that Trigon accumulated between 1935 and 1988, when it began paying state insurance premium taxes.
Consumer leader Fox said her group is concerned about the size of the Trigon contribution and unanswered questions about the charitable foundation.
In California, when its Blue Cross Blue Shield got permission from the state to convert to a for-profit company, it agreed to donate its entire value - more than $3 billion - to charity. In comparison, the proposal for Virginia "sounds like a bad deal," said Jeanne Finberg, senior attorney with Consumers Union, the publisher of Consumer Reports, in San Francisco.
``[Gilmore] picked this figure out of a hat. The surplus amount relates to nothing under the law. It sounds like a solution that serves certain political needs, but it doesn't comply with the statue," Finberg said.
Mark Miner, a spokesman for Gilmore, said it was misleading to compare the Virginia and California cases because the two states have different laws and the companies were organized differently.
At a morning news conference, Gilmore provided sketchy details about the foundation. He could not say who would appoint the members or how much of the $159 million would be held in trust.
Gilmore left open the possibility that a chunk of the money could go directly into the 1996-98 state budget, which would help Gov. George Allen cope with political pressure to increase higher education funding.
The Virginia Citizens Consumer Council has taken a position that the money should remain in trust, dedicated to addressing the unmet health needs of Virginians.
LENGTH: Medium: 67 linesby CNB