Christie pushes Horizon to voluntarily tax itself to help NJ’s poor
Calling the money it keeps in reserve an “abundant surplus,” Gov. Chris Christie wants Horizon Blue Cross Blue Shield to make yearly, voluntary payments into a new fund the state would use to expand health-care services for people with low incomes.
Christie floated the idea in his Tuesday budget speech, though it’s not part of his formal budget plan. Officials at the health insurance company swiftly opposed it, though legislative leaders didn’t dismiss the idea summarily.
The idea drew ripples of laughter in the Assembly chamber when Christie suggested Horizon would willingly go along.
“Now, I am confident that Horizon will embrace this opportunity and partner with us to establish – why wouldn’t they? You laugh, so cynical,” Christie said.
Christie didn’t specify how much money Horizon would be asked to put into the new permanent fund, but $300 million a year is the most common estimate. He said the money initially would be used to expand drug rehabilitation treatment for the uninsured.
“Today, it’s drug addiction. Tomorrow, this fund could be used to support our hospitals’ missions or the ever-increasing need for healthcare for the poor,” Christie said.
Horizon opposes the idea and says raiding the reserves would make health insurance more expensive, because premiums are the company’s primary source of revenue.
Horizon paid more $10 billion in claims last year and anticipates $11.5 billion in 2017. It had $2.4 billion in cash reserves at the end of December – which it says amounts to around $628 for each of its 3.8 million members and represents enough cash to cover 75 days’ worth of expected claims.
Christie – and Horizon, in a Q&A on its website – cites a higher number to measure its end-of-2016 reserves, $2.9 billion. The company says that is the number it reports for accounting purposes that includes the value of fixed assets it wouldn’t actually use to pay claims.
Horizon says its reserve – using an industry measurement called ‘risk-based capital’ that compares cash on hand to size and risk – has declined each year since 2013 and is projected to drop again in 2017. It would still be nearly triple the state-mandated minimum reserve, however.
In 2015, the most recent year for which an annual report has been published, Horizon had nearly $11.5 billion in revenue and $11.3 billion in expenses, including $9.4 billion for medical and other benefits and $1.9 billion for “selling, general and administrative expenses.”
Though a not-for-profit company, Horizon paid $545 million in taxes last year, including $332 million in federal taxes, $207 million to the state and $6 million in local property taxes, mostly to Newark.
It says its state tax would be $46 million less if it was for-profit; its federal tax would be $9 million higher. Though it would have to start paying state sales tax and local payroll taxes, the premium taxes it pays the state would drop significantly. Christie is not proposing that the company become for-profit.
Legislative leaders said they’d want to talk with Christie and Horizon but didn’t flatly dismiss his idea.
“I understand what Horizon’s saying, too, but I want to see what the governor’s actually talking about. I’m not going to condemn something unless I actually know what the numbers are, what makes sense,” said Senate President Stephen Sweeney, D-Gloucester.
“That’s something we’ll definitely look at because we always want to make sure that the underserved in the state of New Jersey, we take care of them,” said Assembly Speaker Vincent Prieto, D-Hudson. “We look forward to working with Horizon to see what that looks like and what this is, the possibility of it.”
Beyond them, the concept was panned from multiple directions.
“I can’t think of a worse time to potentially hurt New Jersey health care in light of the looming unknowns in Washington about the future of the Affordable Care Act,” said Sen. Richard Codey, D-Essex.
New Jersey Education Association president Wendell Steinhauer expressed “deep concerns” that diverting money from Horizon’s reserve would lead to higher insurance costs.
“If funding is simply taken out of the reserve and must be replaced, that would likely raise the healthcare premiums on people who get their health insurance through that system,” Steinhauer said.
The director of the New Jersey Working Families Alliance, Analilia Mejia, called the proposal “a shakedown … which will undoubtedly leave consumers holding the bag and ultimately paying higher premiums in an already precarious health care environment.”
The criticisms weren’t lobbed just from the liberal end of the political spectrum. Americans for Prosperity said it is “deeply concerned,” and Horizon provided a statement from Bedminster publishing executive Steve Forbes, a two-time candidate for the Republican nomination for president.
“When government steps in to the marketplace in this fashion, as we have seen in New York, higher taxes and increased consumer costs are sure to follow,” Forbes said.
Forbes said it would be sensible to approach opiate abuse by engaging New Jersey’s pharmaceutical companies and charities.
“However, imposing a permanent tax increase on the back of New Jersey residents and patients is not only fiscally reckless, but sets an awful budget precedent,” Forbes said.
State lawmakers considered taking $300 million from Horizon’s reserves to pay for charity care in 2005, then abandoned the idea. Then-Treasurer John McCormac – at the time serving under Codey, who was New Jersey’s governor for 14 months – said the move would have been illegal.