THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Wednesday, September 11, 1996 TAG: 9609110454
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
DATELINE: RICHMOND LENGTH: 56 lines
State regulators questioned the chairman of Trigon Blue Cross Blue Shield on Tuesday about the value of its Blue Cross Blue Shield affiliation and the benefit to prospective shareholders.
``We would have a very difficult time in this market without the (Blue Cross and Blue Shield) trademarks and trade names,'' Trigon chairman and chief executive officer Norwood H. Davis Jr. told the State Corporation Commission.
But the SCC's three commissioners expressed concern that restrictions on the ownership of a Blue Cross or Blue Shield company might reduce the value of the shares that Trigon wants to distribute to its policyholders.
Davis' testimony came during the second day of hearings on Trigon's plan for converting from a nonprofit, policyholder-owned company to a stock company that would be owned by investors.
Without putting a dollar value on Trigon's ability to use the Blue Cross and Blue Shield designations, Davis said they were worth far more than the $90 million that the company would have to pay to surrender them to the Blue Cross Blue Shield Association.
The Chicago-based association imposes standards and restrictions on health insurers like Trigon thathave been licensed to use the Blue Cross and Blue Shield trademarks.
Richmond-based Trigon, the largest health insurer in Virginia, has notified regulators that it wants to distribute more than 60 million shares to policyholders and sell several million additional shares to the public. The SCC must determine whether Trigon's conversion plan is fair and equitable to its 200,000 policyholders.
The SCC's hearings are scheduled to continue today with testimony from witnesses for the Virginia Bureau of Insurance, a unit of the SCC.
While on the stand Tuesday, Davis also described Trigon's expansion plans and defended its intention of offering stock options to key managers.
``We have no aspirations of becoming a national company, but we want to be the regional Blue in the Southeast,'' Davis said. ``There is a huge opportunity for the Blues in the Southeast to get together.''
In its application for converting to a stock company, Trigon has said it must expand beyond Virginia to compete with some of the larger health care providers coming into the state. To do that, it will have to raise added capital in the stock market, Trigon has said.
Earlier in the day, a representative of the advocacy group Consumers Union of U.S. Inc. called on the SCC to have Trigon turn over its assets to a health care-related foundation.
``If the commission approves Trigon's proposal, hundreds of millions in charitable health care assets that rightfully belong to the public will be lost at a time when there are major unmet health care needs in the state,'' said Charles W.F. Black, programs manager in Consumers Union's New York office. Consumers Union publishes the monthly magazine Consumer Reports.
In an agreement struck with the General Assembly earlier this year, Trigon said it would turn over $175 million to the state treasury to compensate for certain tax breaks the company once received. by CNB