THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, December 8, 1995 TAG: 9512080503
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVID M. POOLE, STAFF WRITER
DATELINE: RICHMOND LENGTH: Medium: 85 lines
Attorney General James S. 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 scenario 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 would endow a foundation dedicated to higher education, medical research and health-care education.
Trigon's ability to work with 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.
The state's largest insurer wants to sell stock so it can raise capital and compete in the ever-changing industry. Trigon has suggested the stock could be va ***[Because of technical difficulties, the following part of this story did not appear in the newspaper but it does appear in the library database]***
[lued at $1 billion to $1.75 billion. Public hearings on the application could take place as early as 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 the agreement worked out by Trigon and his staff is a sign of good faith. He noted that a charitable foundation 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 had accumulated between 1935 and 1988, when it began paying state insurance premium taxes.
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 received permission from the state to go public, the insurer agreed to donate its entire value - more than $3 billion - to charity when it converted to a for-profit company.
In comparison, the proposal for Virginia ``sounds like a bad deal,'' said Jeanne Finberg, senior attorney with Consumers Union, publisher of Consumer Reports, in San Francisco.
``He (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 statute.''
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 press 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 F. 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.] by CNB