THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Wednesday, February 21, 1996 TAG: 9602210008
SECTION: FRONT PAGE: A10 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 72 lines
The Virginia House of Delegates and the Senate disagree on what to do with $175 million that they think the commonwealth will get as part of a settlement with Trigon Blue Cross Blue Shield.
The House has voted to put all the money into the General Fund, to be used for education this coming biennium and to squeeze the state through a financial tight spot. That's a bad plan.
The Senate wants to reserve $35 million for a foundation to underwrite medical research at public and private universities. That much money, especially if used to provide matching funds to get even more, could be an economic engine driving biotechnology in Virginia.
Originally, $165 million from Trigon was to go into a state medical and educational foundation. That was the amount Trigon was worth at the end of 1987, the last year that the state did not tax it. Since Trigon had benefited from some 50 years of tax-free status, the company and Attorney General James S. Gilmore III agreed that $165 million was a fair amount for the company to pay Virginia taxpayers, in the form of the state foundation.
It made sense to invest this windfall for the long term, but Gov. George Allen's proposed budget called for using $95 million of the Trigon money to plug budgetary holes. Under this scheme, only $70 million would have gone to the foundation. Now, apparently, $35 million at most will go to the foundation. This constant whittling is shortsighted.
Trigon would pay $165 million to the state under the agreement with the attorney general, or $175 million under the House and Senate budget bills, in exchange for being allowed to convert from a non-profit company owned by its policy holders to a for-profit company owned by stockholders.
Trigon says it must make the conversion in order to sell stock to raise money to compete with national HMO giants preparing to descend on the Southeast, which is behind the rest of the country in using new forms of health insurance.
Trigon, which insures 1.8 million Virginians and employs more than 4,000, probably is right that wolves are at its door. Given that there are no walls surrounding Virginia to keep national insurance companies out, Trigon will have to expand beyond the commonwealth to survive.
Ultimately the State Corporation Commission will approve or disapprove the conversion. Policy holders must also vote to approve the conversion.
In other words, the $175 million the state is planning on may never materialize.
It's a sign of the tight state of finances in Richmond that a bird in the bush is being counted as a bird in hand to balance the budget. And an opportunity to benefit Virginians for decades to come may be spent in one fell swoop.
The House and Senate will have to reach an agreement on the Trigon money before the budget bill goes on to the governor. The Senate version, providing for the foundation, is far superior to the House one. It recognizes that there is a future beyond the next biennium.
One part of the House bill does make sense, however. Because many state employees were insured by Trigon, the state, as a large policyholder, will get 1.8 million shares of Trigon stock if the company goes public. That's apart from the $175 million at issue.
The House would give The University of Virginia and Medical College of Virginia each 40 percent of the shares, with the remainder going to Eastern Virginia Medical School. The value of each share is not known yet, but a considerable amount of much-needed money would help bail out the struggling medical schools.
A compromise between the two houses appears easy. Take the Senate idea to fund a medical research foundation with as much of the $175 million as possible. Add the House idea to support the money-strapped medical schools with stock. by CNB