ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, May 1, 1996 TAG: 9605010053
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: RICHMOND
SOURCE: DAVID POOLE STAFF WRITER
Virginia's major consumer advocacy group on Tuesday gave up its fight with Trigon Blue Cross Blue Shield's proposed conversion to a for-profit stock company.
The Virginia Citizens Consumer Council had planned to ask the State Corporation Commission to let the public benefit from an estimated $1 billion windfall when Trigon begins to sell stock on Wall Street.
But the consumer council's objections have been rendered moot by Trigon's high-powered lobbying effort, which earlier this spring persuaded the General Assembly to approve a law restricting SCC oversight in the matter.
"They cut our case right out from under us," said Jean Ann Fox, consumer council president.
Trigon has won postponement of an SCC hearing on the case until after the new law takes effect July1.
Brooke Taylor, a Trigon spokeswoman, said the company was disappointed by the consumer council's decision to withdraw as a formal objector to its petition.
"We continue to welcome their participation in keeping with the long-standing rules of the SCC," Taylor said.
The Richmond-based insurer wants to convert from a mutual insurance company, meaning it is owned by its policyholders, to a public stock corporation, owned by shareholders. It has said it needs to sell stock to investors to raise capital so it can compete in a rapidly consolidating health-care industry. The company, which now sells health and hospital insurance to about a third of all Virginians, wants to expand into other Southeastern states.
Fox contends Trigon gained its dominant market position because of its special status, earning state tax breaks in return for a guarantee to provide insurance to anyone who applied for coverage. Fox said the public, which paid for the tax breaks, should receive the full benefit of the Trigon stock sale.
To head off such a move, Trigon gave the General Assembly a high-stakes offer: In exchange for legislation restricting the SCC's authority to structure its conversion plan, Trigon would provide more than $150 million worth of stock to balance the cash-starved 1996-98 state budget.
Trigon enlisted some of the assembly's most powerful members. The company paid House Majority Leader Richard Cranwell of Vinton more than $500,000 over two years for legal advice. Trigon also paid $9,581 to the legal firm of Del. George Heilig, a Norfolk Democrat who headed a special House subcommittee on Trigon legislation.
"This has been a very educational year for us," Fox said. "We have decided to stop our single-minded focus on consumer protection laws and turn our attention to how laws get made."
LENGTH: Medium: 56 linesby CNB