Blue Cross, Blue Shield Nevada sale done

Grace Leong

Thursday, Nov. 18, 1999 | 11:19 a.m.

New lawsuit

A group of 16 Connecticut doctors is suing Anthem Inc., owner of Blue Cross-Blue Shield of Nevada, alleging it delayed or denied payment for medical services.

The doctors sued Anthem Blue Cross & Blue Shield of Connecticut, the Indianapolis Star reported.

Anthem declined comment on the suit, which alleges Anthem practices interfere with doctors' abilities to provide quality service to patients. The suit says Anthem pre-approved procedures but doctors performing those services later had trouble getting paid.

Anthem Inc. of Indianapolis completed its acquisition on Tuesday of Blue Cross-Blue Shield of Colorado and Nevada.

But the battle continues between the insurance commissioners of Nevada and Colorado over Nevada's right to get a cut of the $155 million Anthem agreed to pay for Blue Cross-Blue Shield of Colorado and Nevada. At this point, all of that money goes into Caring for Colorado Foundation, a charitable trust that benefits only Colorado citizens.

Under Colorado law, a nonprofit company that converts to a for-profit business must pay a fee based on the value of its assets to compensate for benefits it gained while it was nonprofit. Blue Cross-Blue Shield had to convert to a for-profit company because Anthem is a mutual insurance company and Colorado law doesn't allow mutual companies to offer health insurance.

Nevada was blocked by Colorado Insurance Commissioner William Kirven from seeking a cut of the conversion proceeds and intervening in Blue Cross-Blue Shield's application to change to a for-profit company, but appealed Kirven's decision last month in a Colorado state court.

"We're now considering whether to proceed with the appeal or initiate separate legal action. We are trying to establish that Nevada has a legal entitlement ... and are evaluating additional litigation options as to how best to continue to assert Nevada citizens' claims to a portion of those conversion proceeds," said Tom Patton, Nevada's first assistant attorney general.

Patton declined to estimate the size of conversion proceeds Nevada is hoping to gain. John Sasser, statewide advocacy coordinator for Nevada Legal Services, estimated Nevada could get a maximum of $21 million based on Anthem's original $140 million offer, which was later hiked to $155 million.

Sasser led an effort in the 1999 Legislature to change Nevada law to make it similar to Colorado's so Nevada could be in line for a share of the money.

Patton maintained Nevada has a claim to the conversion proceeds because Blue Cross-Blue Shield of Nevada's subscriber base had approximately doubled since the merger of the Nevada and Colorado insurers in 1996. The company now insures about 93,000 subscribers in Nevada.

Blue Cross-Blue Shield sought to become a private for-profit company in January 1997 but later changed its mind because it feared its planned initial public offering would be hurt by the the poor stock market conditions of mid-1998, Blue Cross Blue Shield of Colorado and Nevada's spokesman Neil Westergaard said. The company later agreed to be sold to Anthem, which operates Blue Cross businesses in Midwest states.

Colorado and Blue Cross-Blue Shield officials Wednesday explained why they oppose Nevada gaining a share of the Colorado trust fund money.

In an Oct. 1 order denying Nevada's petition to join in the conversion proceedings, Kirven said, "if the (Nevada) attorney general believed the transaction was unfair to Nevada citizens, the time to assert that position was during the approval of the 1996 transaction before the Nevada Commissioner of insurance, not three years later in a foreign jurisdiction."

"What Nevada seeks is analogous to a Microsoft shareholder who sells his stock for $20 per share in 1996, but continues to purchase Microsoft software and seeks to have the current owner of his stock, who sold it this year for $80 per share, share part of his $60 gain with the original shareholder," Kirven said.

"Like the original Microsoft shareholder, Nevada citizens forfeited any rights to subsequent gains in Blue Cross of Nevada when they sold the company in 1996 (for $11.48 million)," he said.

"Colorado statutes say the conversion proceeds can go only to Colorado citizens," added Colorado insurance agency public affairs director Nancy Ryan. "Both insurance commissioners back in 1996 agreed to disallow financial benefits to Nevada policy holders from the Colorado Public Trust funds. But Nevada policy holders will continue to receive the same treatment as Colorado policy holders."

Blue Cross-Blue Shield's Westergaard agreed. At the time of the two insurers' merger in 1996, Westergaard said the then Nevada insurance commissioner had ruled Blue Cross-Blue Shield of Colorado didn't have to pay a charitable benefit to the people of Nevada since Nevada Blue Cross was then a financially troubled plan. "Nonetheless we set up an endowment fund of $1.5 million," he said.

Patton, however, disagreed.

"It is our position that the charitable endowment is not an issue because there was no conversion pending at that time," he said.

The company, renamed Anthem Blue Cross and Blue Shield, will continue to operate out of Denver. The merged company is part of Anthem West, a unit set up to organize Anthem's health care management and insurance businesses in the West.

Anthem Blue Cross and Blue Shield, which offers employer-sponsored life and disability insurance, dental coverage and workers' compensation, is one of Colorado's largest health insurers with around 405,000 customers.