ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, September 4, 1996 TAG: 9609040096
SECTION: BUSINESS PAGE: B8 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
PROXY HOLDERS ARE VOTING whether the state's largest insurer will go public on the stock market.
Trigon Blue Cross Blue Shield can't tell policyholders how the stock market will react if holders make the company a for-profit, shareholder-owned corporation.
But the state's major health insurer has hired agents to encourage clients to vote, while also not saying how much it is spending to solicit their proxies.
Vanessa Scharzer, Trigon spokeswoman, said the company is calling a sample of policyholders to ask if they need help returning the proxy card mailed to them last month.
She said Trigon will not disclose the cost of the proxy solicitation or the percentage of policyholders who have responded.
The vote will be announced at a 9 a.m. meeting Friday at its Richmond headquarters. All votes must be received by then either at Trigon's Richmond office or at the New Jersey firm that is counting the vote.
About 200,000 Trigon customers - both companies and individuals - may vote. In the case of group insurance provided through an employer, the employer is considered the policyholder. Policyholders have been told the number of shares of stock they would get if the vote is for conversion.
Two-thirds of the policyholders must vote yes for it to be approved. The company's status change also is subject to approval by the State Corporation Commission, which has scheduled a public hearing at 10 a.m. Sept. 9 in Richmond.
Norwood H. Davis Jr., Trigon's chairman and chief executive officer, said the conversion would help the company grow.
``The status quo is not an option,'' Davis said. ``Trigon is falling farther behind its competitors every day. Trigon is losing the opportunity to expand both in Virginia and the other areas it must grow to succeed.''
Trigon, a $1.7 billion-a-year company, has about 30 percent of Virginia's health insurance market. It pays for the health care of 1.8 million people in a territory that covers all of Virginia except for parts of the Washington suburbs.
Despite its size, Trigon doesn't have the capital to take on competitors that are moving into Virginia, Davis said.
Scott & Stringfellow Inc., a Richmond brokerage, is advising its clients to vote in favor of switching to a stock company. Spokesmen for three regional brokerage houses - Interstate/Johnson Lane, Wheat First Butcher Singer and J.C. Bradford & Co. - said they are not offering advice on the proposal.
George F. Shipp, who follows health care issues for Scott & Stringfellow, said the firm has not issued an opinion, but is advising clients who ask that a yes vote "makes sense for most people."
Currently, he explained, all policyholders have is a policy which has no monetary value beyond its insurance benefits. If conversion is approved, policyholders would receive cash or stock.
"To me," Shipp said, "it's a windfall," especially for corporations.
He has no recommendation on whether people should ask for cash or stock if the conversion is approved because conversion is a necessary first step. Shipp pointed out that cash would be subject to tax in the year in which it is received, although it may be possible to defer taxes in some cases.
Jean Ann Fox, president of Virginia Citizens Consumer Council, said the issue for Virginians is how a for-profit company that answers to Wall Street will act in meeting the state's health needs.
Trigon hasn't said how much stock it will sell to nonpolicyholders, but has indicated it could sell up to 49 percent of shares to outside investors.
Fox said the stock distribution doesn't give enough to smaller policyholders. Trigon's SCC filings show that less than 40 percent of shares will go to individuals.
Nobody's health insurance policy would be adversely affected by the conversion, Shipp said.
People wouldn't be able to sell the stock for the first six months, Shipp said, but he expects it to have value when the market opens to trading. The stock would be listed on one of the national stock markets.
Shipp said "a lot of questions remain" on how the stock would be handled but the decision in favor of conversion "is easy," especially for corporate accounts.
- The Associated Press contributed to this story.
LENGTH: Medium: 81 linesby CNB