September 5, 2002 | Read Time: 2 minutes
A consumers’ group and several health-care organizations have filed a lawsuit to block New York State from taking most of the approximately $1-billion that will become available as a result of the conversion of the nonprofit health insurer Empire Blue Cross and Blue Shield into a for-profit corporation.
Under New York’s plan, Empire would provide 95 percent of Blue Cross assets to the state, which wants to use much of the money for raises for hospital and nursing-home employees and the rest for other health-care expenses. The remaining 5 percent of the assets — about $50-million — would go to create a foundation dedicated to improving health care for poor New Yorkers.
The lawsuit, filed in the Supreme Court of the State of New York, challenges the legislation that authorized Blue Cross’s conversion to a for-profit company. At issue, Consumers Union said, is “whether the estimated $1-billion can be taken by New York State and used for purposes that are far removed from the nonprofit insurer’s original charitable mission — expanding and maintaining access to affordable health coverage.”
The suit charged that the conversion legislation deprives New Yorkers of their stake in the assets held in trust to promote and maintain health coverage for Empire subscribers and others who need access to care. It said the state’s decision violates the New York and U.S. Constitutions.
In a statement, Empire Blue Cross and Blue Shield said that the legislation allows the state to spend the conversion money on a variety of programs to expand access to affordable health care. “We believe using the public asset to support and expand these programs — particularly at a time when similar programs around the country are being cut back — is consistent with Empire’s original mission,” the organization said.
Some nonprofit leaders nationwide have been concerned that state governments will siphon off for other purposes the large sums of money generated from conversions that the leaders maintain should go to tax-exempt groups.
More than 165 foundations have been identified as either new groups created through conversion agreements or existing ones that have received assets from conversions, according to Grantmakers in Health, a Washington group.
Among those filing suit in the New York case: Consumers Union, the New York chapter of the National Multiple Sclerosis Society, and five Empire policyholders.
