THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Wednesday, August 2, 1995 TAG: 9508020465
SECTION: BUSINESS PAGE: D6 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: RICHMOND LENGTH: Medium: 51 lines
The attorney general's office has suggested that if the state's largest health insurer converts from a mutual insurance company to a for-profit business, all Virginians might be due stock in the company.
In filings last week to the State Corporation Commission, Deputy Attorney General Catherine C. Hammond argued that because Trigon Blue Cross Blue Shield had benefited for years from state tax breaks, that ``raises . . . the question of the public's right to receive this capital stock.''
Trigon was exempt from federal income tax until a 1986 tax reform act. The company pays a premium tax at a rate one-third that paid by other insurers in return for a promise to provide health insurance to any Virginian who wants to pay for it.
The company now wants to become a for-profit venture. To do so requires SCC approval.
Hammond said in addition to the issue of whether all Virginians, not just policyholders, are entitled to some ownership in Trigon, the attorney general's office would like the SCC to explore other questions, including:
What restrictions or conditions could be put on the company to ensure that consumers get reasonable health care coverage from a for-profit Trigon.
Whether top executives and directors would reap any windfalls from the conversion. Trigon has said its top officers would not get any stock or stock options as part of the conversion and stock sale.
How Trigon would allocate stock among its policyholders, which policyholders would get cash instead of stock, and the size and structure of any sale of stock to outside investors.
As part of her filing, Hammond said Trigon has suggested that the market value of all the stock it would distribute would fall between $1 billion and $1.75 billion.
Trigon's net worth stands at $650 million. It has asked the SCC to approve its request to divide that among its policyholders, giving them stock that would represent ownership shares in that net worth.
Trigon's request said the company expected to sell additional stock worth at least $25 million to outside investors. The company gave no further information about its plans, and Trigon officials repeatedly have declined comment on that issue.
Trigon spokeswoman Brooke Taylor said Monday that Hammond's figure came from a background briefing on the plan. by CNB