$150-Million Fund Planned for Missouri

Blue Cross and Blue Shield of Missouri and state officials, who have been involved in a legal dispute over the insurer’s creation of a for-profit subsidiary, have tentatively agreed to a settlement that would create a health-care foundation worth at least $150-million.

Under the settlement, the foundation would be started with 15 million shares of stock from the subsidiary, RightChoice Managed Care, that Blue Cross and Blue Shield owns. The foundation would become the state’s largest health-care foundation.

The dispute began shortly after Blue Cross and Blue Shield of Missouri transferred 80 per cent of its assets to the new subsidiary, which was set up in 1994 to handle the insurer’s profitable managed-care business. The deal was initially approved by the state Department of Insurance, but after a subsequent review, state officials declared that the reorganization amounted to a for-profit conversion and that Blue Cross and Blue Shield had to compensate the public for years of tax-exempt status.

In May 1996, Blue Cross sued the state and the Attorney General, arguing that they had no authority to question a deal that had already been approved. A judge in Cole County Circuit Court ruled against the insurer, which then appealed that decision.

Several public-interest groups that had opposed the 1994 reorganization said they were pleased with the tentative settlement. But they said they hoped that a final agreement would give Blue Cross a minimal role in the new foundation and that there would be public involvement in the selection of a board of directors.