ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, January 28, 1996 TAG: 9601290041
SECTION: VIRGINIA PAGE: B-1 EDITION: METRO
DATELINE: RICHMOND
SOURCE: Associated Press
MEMO: ***CORRECTION***
Published correction ran on January 30, 1996.
Del. Allen Dudley of Rocky Mount is a Republican. His party
affiliation was incorrect in a story Sunday.
Trigon Blue Cross Blue Shield, which gave nearly $45,000 to General Assembly candidates in the last election, wants the assembly, not state regulators, to set the size of a foundation the company would establish as part of its bid to convert to a for-profit company.
But one of the few bankers in the General Assembly says the public could get shortchanged because the proposed settlement fails to account for inflation.
The foundation is intended to pay Virginians back for a half-century of preferential treatment, including tax breaks the company received as a nonprofit, mutual insurance company.
The conversion to a for-profit enterprise requires the approval of the State Corporation Commission.
The proposed legislation says that former health services plans that want to convert to for-profit companies owned by stockholders, must put a sum of money into a foundation that equals their net worth as of Dec. 31, 1987.
That is the date Trigon lost its tax exemption, and Trigon's net worth at that time was $159 million. Trigon, however, still receives some tax breaks. It pays a tax on premium income that is one-third the rate of other insurers in return for its promise to insure anyone willing to pay for a policy.
If enacted, the legislation means all the SCC would have to do is find that the $159 million was, in fact, Trigon's net worth on Dec. 31, 1987, SCC senior counsel Peter Smith said.
Del. Allen Dudley, D-Rocky Mount, said inflation has eroded the value of the 1987 surplus.
"Even if they had put the money in a savings account with 5 percent compounded interest, you're talking $220 [million] to $250 million in the true worth today," he said.
If the legislation is not enacted, the SCC would be free to consider whether there should be a foundation and what size it should be.
Trigon's net worth now exceeds $650 million.
Consumer advocates say Trigon's appeal to the legislature appears to be an attempt to limit the SCC's review of Trigon's conversion bid. Such legislation would bypass critics' efforts to persuade the SCC to increase the size of the foundation.
``It's pre-empting the SCC process,'' said Julie Lapham, executive director of Common Cause of Virginia and a member of one of Trigon's consumer advisory boards.
``There are a lot of questions about the number,'' said Lapham, referring to the $159 million endowment for the foundation. ``That's the sort of thing the SCC should be considering.''
The aim of the bill was to clarify Virginia law on how mutual insurers can convert themselves into stockholder-owned companies, said Del. John Watkins, R-Chesterfield County, chief sponsor of the legislation in the House of Delegates.
Asked if the bill would rule out any SCC-ordered modifications to the foundation, Watkins said he wasn't sure, but that would be a question for committee hearings to resolve.
The company has enlisted a team of heavy-hitting state lawmakers on its side. Co-sponsors of the bill include House Speaker Thomas Moss, D-Norfolk; House Corporations, Insurance and Banking Chairman George Heilig, D-Norfolk; and Democratic Caucus Chairman Alan Diamonstein, D-Newport News.
Trigon also has provided state lawmakers a powerful incentive to sign onto its plan: Allen has proposed plugging $95 million of the Trigon settlement into the 1996-98 state budget. Lawmakers from both parties eager to make good on campaign promises to increase state funds for education may find the Trigon money irresistible, though some critics say the SCC case, if appealed, may not be resolved for a year or two.
SCC counsel Smith said the commission neither supports nor opposes the bill.
LENGTH: Medium: 80 lines KEYWORDS: GENERAL ASSEMBLY 1996by CNB