THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, January 28, 1996 TAG: 9601280201
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: BY DAVID M. POOLE, STAFF WRITER
DATELINE: RICHMOND LENGTH: Medium: 69 lines
State Del. Allen W. Dudley says the public could get shortchanged in the conversion of Trigon Blue Cross Blue Shield to for-profit status because a proposed $159 million settlement fails to account for inflation.
Trigon has based the amount it would donate to a public foundation on the company's net worth at the end of 1987, when the insurer surrendered special state tax breaks.
Dudley, a banker from Franklin County, said inflation has eroded the value of the 1987 surplus.
``Even if they had put the money in a savings account with 5 percent compounded interest, you're talking $220 (million) to $250 million in the true worth today,'' he said.
Faced with mounting opposition from consumer groups, Trigon is looking to the General Assembly to lock in the $159 million figure before the State Corporation Commission acts on the company's application to become a stock company.
``It's pre-empting the SCC process,'' said Julie Lapham, executive director of Common Cause of Virginia and a member of one of Trigon's consumer advisory boards.
Trigon, the state's largest insurer, is seeking SCC approval to convert to for-profit status and raise millions of dollars in capital through stock sales.
Trigon has agreed to place $159 million worth of stock in public trust in recognition that special state tax breaks enabled the company to gain a dominant position in the state's competitive health insurance market.
State Attorney General James S. Gilmore III has endorsed the Trigon foundation, saying the money would repay the public for tax benefits the company enjoyed for 50 years, from 1938 to 1987.
But consumer groups say the public should reap the full value of Trigon, which now has a net worth exceeding $650 million. Gilmore's office - citing Trigon estimates - says the stock sales could double the value of the company.
And Dudley and other lawmakers say the $159 million figure does not represent the present value of the company's net worth in the mid-1980s.
Trigon is backing a bill that would stop any effort in the assembly to increase the figure and, possibly, block the SCC from tinkering with the number later this year.
The aim of the bill is to clarify Virginia law on how mutual insurers can convert themselves into stockholder-owned companies, said Del. John Watkins, R-Chesterfield, chief sponsor of the legislation in the House of Delegates.
Asked if the bill would rule out any SCC-ordered modifications to the foundation, Watkins said he wasn't sure but that would be a question for committee hearings to resolve.
Trigon contributed $65,000 to General Assembly members last fall and donated another $10,000 to a political action committee headed by Gov. George F. Allen.
Co-sponsors of the bill include House Speaker Thomas W. Moss Jr. of Norfolk; House Corporations, Insurance and Banking Chairman George H. Heilig Jr., D-Norfolk; and Democratic Caucus Chairman Alan A. Diamonstein, D-Newport News.
Trigon also has provided state lawmakers a powerful incentive to sign on to its plan: Allen has proposed plugging $95 million of the Trigon settlement into the 1996-98 state budget. MEMO: The Associated Press contributed to this story.
KEYWORDS: GENERAL ASSEMBLY by CNB