THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, September 15, 1996 TAG: 9609170512
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
DATELINE: RICHMOND LENGTH: 117 lines
From the rear of Court Room C at the State Corporation Commission, Julie Lapham surveyed a field of gray suits.
On one side near the front sat Trigon Blue Cross Blue Shield's chief executive officer, Norwood H. Davis Jr., and a handful of other Trigon officers. Behind them sat a battery of lawyers, accountants and investment bankers who would testify on the health insurer's behalf.
To their left were regulators from the Bureau of Insurance, including Virginia's insurance commissioner, Alfred W. Gross. Close by were the actuarial, accounting and financial consultants advising the bureau.
Clustered in the back row of the wood-paneled courtroom were a handful of advocates from consumer and government-watchdog groups.
But where were the representatives of churches, labor unions and medical organizations that had voiced concerns about the cost and availability of health care, wondered Lapham, executive director of Common Cause of Virginia.
``I found the light turnout pretty amazing. The silence was deafening,'' she said.
For several months, Trigon had been promoting its application to convert from a nonprofit company to an investor-owned company. Earlier this month, a consumer-advocacy group had conducted a weeklong campaign of radio ads raising questions about the plan and the SCC's public hearings.
But the first day of those hearings last Monday attracted fewer than 60 observers and participants. By Wednesday, the number had dwindled to about 35.
The SCC had scheduled nine days of hearings and set aside adjacent courtrooms to accommodate an overflow crowd. The added space wasn't necessary. With only about a dozen public witnesses taking the stand, the hearings lasted only two and a half days.
Trigon, which provides health-insurance coverage for 1.8 million Virginia residents, had told state insurance regulators it needed additional capital to survive in the face of tougher competition among health care providers. To raise that capital, it had to convert from a nonprofit company to one whose shares would be publicly traded.
The financial stakes in the conversion process were significant. In addition to changing its corporate structure, Trigon had decided who was entitled to receive stock in a company with more than $700 million of retained earnings.
Trigon already had gotten approval for the conversion from its policyholders. It appeared before the SCC last week hoping for approval to proceed.
The modest turnout at the public hearings contrasted sharply with the deluge of letters to the SCC from individuals covered by Trigon policies. Some recommended that the commission approve Trigon's conversion plan. A few questioned why Trigon should have to refund any of its assets to the state treasury.
But scores of other letter writers objected to the conversion plan. They complained to the SCC about Trigon's handling of their insurance claims and expressed doubts that the service would improve if Trigon became a for-profit company.
Representatives of other advocacy groups said some Trigon customers might have been bewildered by the legal and financial details of the conversion process. Also, some individuals with strong opinions might have been intimidated by the judicial atmosphere and the prospect of being cross-examined by lawyers, said Jean Ann Fox, president of the Virginia Citizens Consumer Council.
Lapham of Common Cause surmised that some health care organizations that have benefited from Trigon's charitable contributions were reluctant to antagonize the company. Other organizations apparently refrained from testifying because they were Trigon policyholders.
``I talked to a lot of groups that did not want to go public'' with their concerns, Lapham said.
Consumer advocates said they were troubled by more than a sparse turnout at the hearings. State regulators, they said, had focused their attention too narrowly on economic aspects of Trigon's conversion plan.
``Nowhere has anybody debated the effects on health care in Virginia when the largest health insurer in the state wants to become a for-profit company,'' Fox said.
The SCC, she said, should have provided a forum for discussion of the Trigon conversion much like the commission has done for debate of telecommunications and electric utility issues.
After intense lobbying by Trigon, the General Assembly passed legislation earlier this year that sought to restrict the SCC's scrutiny of Trigon's conversion to whether the plan was fair and equitable to policyholders.
The legislation also called for the company to return $175 million to the state treasury. Those funds would compensate the state for tax breaks that Trigon had enjoyed in the past.
But Trigon has been a nonprofit company, and Virginia law requires it to transfer its assets to a charitable trust that would concentrate on meeting health care needs, Fox and others argued.
The SCC has not said when it will rule on Trigon's application for conversion, but consumer advocates at the hearings said it appeared likely that the Trigon plan would be approved.
Efforts to raise consumer awareness felt like David going up against Goliath - but without a sling, said Lapham of Common Cause.
Would she do it again? ``Yes, I always like to think that public testimony is helpful.''
So would Fox.
Armed with a $25,000 grant from a foundation, the Virginia Citizens Consumer Council combed thousands of pages of records on the Trigon case and distributed its own studies of the company's conversion plan. It also waged a weeklong advertising campaign on Virginia radio stations to promote the SCC's hearings. Despite the small turnout at those hearings, the efforts were worthwhile, Fox said.
``A lot of people throw up their hands and say, `This is a done deal,' '' she said. ``I feel it helps the commission to know what the public is thinking.'' ILLUSTRATION: Graphic
TRIGON BLUE CROSS BLUE SHIELD (BLUE CROSS AND BLUE SHIELD OF
VIRGINIA)
Headquarters: Richmond
Date organized: 1935
Employees: 4,267
Policyholders: 185,000 individuals and 16,000 groups
Customers: 1.87 million
Revenues in 1995: $1.72 billion
Net income in 1995: $46.99 million (after $47.07 million of
refunds to policyholders)
Chief executive officer: Norwood H. Davis Jr. by CNB