HealthLeaders-InterStudy, a leading provider of managed care market intelligence, reports that, if approved, conversion by Horizon Blue Cross Blue Shield of New Jersey to for-profit status may prompt the plan to adopt a more conservative approach to pricing. According to Blue Profiler: Horizon Blue Cross Blue Shield of New Jersey, Horizon has successfully secured market share from competitors over the past two years with aggressive pricing. This approach will likely change with conversion as shareholders will demand better margins than the company's existing 2.1 percent return.
"Not-for-profit Blue plans have traditionally been successful in growing market share in regions where there is a large for-profit plan presence," said Rick Byrne, analyst with HealthLeaders-InterStudy. "Horizon is no exception, growing enrollment throughout all of its products with aggressive pricing and market strategy."
Horizon, New Jersey's largest insurer, currently serves 46 percent of the insured lives in the state, and more than 33 percent of New Jersey's commercial market. In general, states limit reserving capability of nonprofit insurers, keeping their rates low. If the conversion is approved, Aetna and UnitedHealthcare -- the number two and three insurers in the state, respectively -- will likely feel less pressure from Horizon on price.
Horizon previously considered for-profit conversion, first filing and then withdrawing an application in 1996. In 2001, legislation passed in New Jersey enabling Horizon to convert to for-profit status, and stipulating that all stock assets of the company be placed in an independent foundation dedicated to expanding access to affordable coverage for the uninsured. According to HealthLeaders-InterStudy's Summer 2008 TriState Health Plan Analysis, momentum for the conversion was established earlier this year when lawmakers rallied behind a phased approach to universal health care. The state estimates that subsidizing universal coverage will cost New Jersey around $1 billion.
"Horizon's conversion could be a source of funding for the state's universal coverage initiative," noted Byrne. "As this is an attractive proposition for the state, the conversion effort will very likely be a success."
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