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PROCESS - BLUE CROSS AND BLUE SHIELD'S PROPOSED CONVERSION TO A DOMESTIC STOCK INSURER
Blue Cross must prepare two plans:
The conversion plan is submitted to the Superintendent of Insurance and the Attorney General
The charitable trust plan is submitted to the Attorney General. The Attorney General is the only person authorized to represent the charitable interests of beneficiaries of the charitable obligations of Blue Cross.
CHARITABLE TRUST PLAN
The charitable trust plan describes the charitable trust which will be used following the conversion to further Blue Cross' charitable mission. The mission of the charitable trust must include, but is not limited to, serving the State's unmet health care needs, particularly with regard to medically uninsured and underserved populations and providing access to care and improving quality of care for those populations and providing access to care and improving the quality of care for those populations.
The plan should contain policies and procedures that prohibit conflicts of interest. The trust can be either a new or existing trust or nonprofit corporation formed under Maine law and must also qualify as a federal tax-exempt charity. Annual reports of its charitable activity must be filed with the Attorney General and will be made available to the public via the Attorney General's office and the charitable trust's office.
A director or officer of Blue Cross, any affiliates, or the resulting domestic stock insurer (prior to conversion) who served in this capacity during the three years prior to appointment may not serve as a director of the charitable trust. The trust cannot be controlled by the converted stock insurer, but is allowed to have one director who is serving as a director of the converted stock insurer. The trust's board of directors must represent the people of Maine, including people who represent the interests of the medically uninsured and underserved population.
Superior Court
The Attorney General files an action in Superior Court requesting approval, approval with modifications, or disapproval of the charitable trust plan within 60 days of receipt of the plan. Although the Superior Court must approve the charitable trust plan, is cannot decide the methods used to determine the fair market value of the organization (this is left to the Superintendent of Insurance).
CONVERSION PLAN
Once the charitable trust plan is approved by the Superior Court, the Superintendent of Insurance reviews the conversion plan. (The plan must be available for public inspection and copying at the Superintendent's office and the office of Blue Cross.)
The Superintendent determines the completeness of the plan and assesses the impact on services to subscribers.
Components of the Conversion Plan:
The fair market value determination of the organization prior to conversion must be detailed. The value is to be prepared by parties independent of Blue Cross experience in the area of corporate appraisal and acceptable to the Superintendent. Detail of the elements involved and methodologies used in addition to providing sufficient support of the conclusion reached must be included. The Superintendent of Insurance decides whether the fair market value appraisal is acceptable. (Fair market value of the organization is determined as if it had voting stock outstanding and 100% of its stock was freely transferable and available for purchase without restriction.)
Hearing Before the Superintendent of Insurance
The Superintendent will hold an adjudicatory hearing on the proposed conversion to determine if the conversion plan meets the statutory criteria. Members of the public, may appear at the hearing and provide comment and testimony.
The Superintendent may obtain the assistance of staff and outside consultants to determine whether the conversion plan meets the necessary requirements.
Conversion
No individual of Blue Cross may receive a fee, commission, or other valuable consideration (other than normal compensation) for aiding, promoting or assisting in the conversion except as set forth in the conversion plan and approved by the Superintendent.
If approved, the charitable trust and the subscribers would receive stock of the stock insurer and/or cash according to their ownership interests at the time of conversion.
The converted insurer may issue stock through a public offering.
The former organization's management may not profit from the conversion.
The converted insurer may not transact any business that is considered a conflict of interest with the charitable mission.
Conversion prior to 1/1/01 - 100% of the fair market value of the organization prior to conversion is distributed to the charitable trust.
Conversion from 1/1/01 to 12/31/05 - 95% of the fair market value is distributed to the charitable trust and the remaining 5% is distributed to subscribers (Subscribers are defined as any individuals who had been subscribers to Blue Cross on any date during the preceding three years, as long as the individuals were subscribers for a minimum consecutive period of three months.)
Conversion after 12/31/05 - 90% of the fair market value is distributed to the charitable trust and the remaining 10% is distributed to the subscribers.
Prepared by the Maine Bureau of Insurance - July 13, 1999