THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Tuesday, October 29, 1996 TAG: 9610290270
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: 60 lines
State regulators cleared the way Monday for the state's largest health insurer, Trigon Blue Cross Blue Shield, to convert from a policyholder-owned, nonprofit company to an investor-owned company with shares trading on Wall Street.
The company's policyholders are scheduled to receive stock under the conversion plan, which could be completed early next year.
The State Corporation Commission approved Trigon's conversion application with a provision that restricts the company's officers and board from receiving any stock-based compensation or stock options until 90 days after the ``lockup'' period. In an effort to create an orderly market for the stock, Trigon shareholders will have to hold onto their shares for a six-month lockup period.
Another SCC provision calls for Trigon to reduce an anti-takeover measure restricting the accumulation of Trigon stock from 60 months to 30 months.
In documents filed with the SCC last month, Trigon said it would abide by those stipulations.
The Richmond-based insurer, which provides health-care coverage to 1.8 million residents of Virginia, has said it must grow through acquisitions of other companies if it expects to survive. To raise the capital for that expansion required becoming a for-profit company with publicly traded stock, Trigon said.
Several large health-care insurers, including some other Blue Cross and Blue Shield companies, have merged in recent years because of intense pressure to hold down costs, Trigon executives and consultants told the SCC during three days of public hearings last month.
But a consumer advocacy group that opposed Trigon's application for conversion expressed disappointment with the SCC's action Monday.
``It's not a surprise, but it's a very disappointing outcome,'' said Jean Ann Fox, president of the Virginia Citizens Consumer Council.
The council and other consumer groups had argued that certain Trigon assets should have been earmarked for public benefit, something the State Corporation Commission refused to do.
``We have extensive health-care needs in Virginia that could have benefited from this once-in-a-lifetime opportunity,'' Fox said Monday.
The SCC, however, said in its approval of the Trigon application for conversion that its examination was limited by a state law enacted earlier this year. That measure restricted the distribution of Trigon's assets to its policyholders. Under that law, the only test for weighing Trigon's application was whether it was fair and equitable to its policyholders.
Trigon has agreed to pay the state treasury $175 million to compensate for tax breaks it enjoyed in the past.
Trigon's 15,700 group policyholders and 184,000 individual policyholders approved the conversion plan in early September.
Earlier this year, Trigon said it expected to complete its conversion to a stockholder-owned company in late 1996 or in early 1997. Its conversion plan calls for distributing more than 60 million shares to policyholders and selling several million more shares to the public.
The company has applied for a listing of its shares on the New York Stock Exchange. by CNB