As you’ve heard, one issue at the center of the budget battle is bare knuckle politics over whether the next governor can control how much money Horizon Blue Cross Blue Shield of New Jersey, an underwriter of NJTV News, can keep in reserve. Chief Political Correspondent Michael Aron is standing by at the State House with Horizon’s Senior Vice President of Corporate and Regulatory Affairs Bill Castner.
Aron: That’s right, Mary Alice. We’re outside the Assembly chamber. The Assembly is on recess right now. The Senate is doing its work, it passed the Horizon bill 21-15 a short while ago. But things here are at an impasse, the ship of state has broken down, at least temporarily. It’s all over this Horizon issue. The Assembly tried to pass the budget today, the speaker did, he failed. He got only 24 votes, 27 Democrats choose not to vote for the budget. It’s all over Horizon. The Senate president wants Horizon’s surplus and some reforms there. The governor wants that very much. Horizon is fighting it and the Assembly speaker says it’s not good for the people. As you indicated, I’m joined now by Bill Castner, senior vice president at Horizon. Bill, this is turning into a mammoth political fight, why?
Castner: That’s our question too, Michael. There’s no reason why. There’s no reason why Horizon, one of the most reputable companies in the state of New Jersey, it’s our 85th anniversary, we’ve got 5,000 employees, four million policyholders. We are ranked as one of the best insurance companies in the United States, why does Trenton need to fix us? And why the urgency associated with this? This is obviously a sweeping piece of legislation that just advance in the Senate by a bare minimum of one vote. We’re puzzled. Frankly this is outrageous.
Aron: Well the governor, when he proposed this, said he wanted $300 million of your reserve fund for opioid addiction. Now it’s morphed into for public health programs without a specified number on it. Why not have Horizon kick in some hundreds of millions of dollars if there’s excess surplus for the good of the state on some health care program?
Castner: Well, see, that’s the case. So it’s not surplus. Horizon keeps reserves for the unimaginable. We have the sixth lowest reserve level of all the major not-for-profits in the United States of America. You have to have reserves. The classic example is what happened in Louisiana, Katrina. So Katrina hits, policyholders aren’t paying their premiums, but Blue Cross Blue Shield is paying claims. That’s why you have reserves. You have reserves in case there are specialty drugs that pop up in the market.
Aron: But don’t you have a reserve of something like 550, or 600 percent of what you need.
Castner: We have $2.4 billion in reserves which sounds like a high level in terms of the raw number, but it actually translates to 75 days worth of reserves. S&P, the ratings agency, which came in — in stark contrast to New Jersey — renewed our A rating to Horizon and said our reserves ought to be higher than they are. So this is really a false narrative. The only reason that we’re in this situation is because you’re right, Michael, the governor approached us about helping to pay for unspecified state spending through our policyholders’ reserves. And we tried to negotiate an agreement, it failed and now we find ourselves in the cross hairs of state government.
Aron: The speaker has been your champion on all this, has he not?
Castner: The speaker has said that what’s the urgency here? Why is this tied to the budget? It has no impact at all on the budget and the speaker has said we can talk about reforms, we can talk about reforms if they apply to all not-for-profits. The current legislation would benefit our for-profit competitors. We’re the not-for-profits that are in the exchange.
Aron: The governor said you’re a creation of the state, that you have this social mission that you need to step up to the plate and be part of.
Castner: The governor has a lot of issues, so I understand that he may not have been able to drill down on our corporate structure, but the governor’s completely mistaken. That’s like saying an LLC, which is developed by statute under law, that’s like saying every company in the state of New Jersey is a creature of the state. There’s something called a health service corporation that we’re organized under. It doesn’t make it an agency of the state. We are a private, $13 billion, very successful company. We don’t need Trenton’s help. This is special interest politics at its worst, Michael. I’ve been in this building for quite some time and I’ve never seen this. This bill was introduced Friday night at 7 o’clock when we stumbled upon it on the website. Its thrown up in committee on Monday, and now jammed through on Thursday without any input whatsoever from a company that has half the market. It’s disgusting, Michael.
Aron: Disgusting, that’s strong language.
Castner: Well, it’s accurate and that’s what we’re hearing from members of the general Assembly. It’s tied into a larger political deal. The fact that this is linked directly to school aid for children. This is what’s going on in Washington. This is really what makes people frustrated with politics.
Aron: Is it George Norcross and Steve Sweeney and the governor against Vincent Prieto and Horizon right now?
Castner: I think right now the general Assembly is on the side of our 3. 8 million policyholders, that given the uncertainty in Washington, the idea of, ‘whoa, timeout, maybe we ought to get the input of experts.’ So far there hasn’t been a single credible organization, reform community or business community, progressive community, labor community, they have all come out against. The two major gubernatorial candidates Phil Murphy and Kim Guadagno have said this is not a good idea to come here.
Aron: Can’t the next governor, let’s say Phil Murphy if it is Phil Murphy, undo any of this anyway? We’re engaging in shadowboxing here.
Castner: You know, that’s a really cavalier way of looking at the type of radical impact that would have on this legislation. The legislation would say we’re the insurer of last resort. We almost went bankrupt in 1992 when we last had that designation. The legislation would expand our obligations to not only our own policyholders, but to our competitors’ policyholders which would create economic harm.
Aron: Got to wrap it up.
Castner: OK, Michael. I really appreciate the opportunity. I hope the Assembly stays strong.
Aron: Former Assembly Democratic executive director yourself so you understand what’s going on in this building.
Castner: All too well.
Aron: Kind of crazy, is it not?
Castner: Very much so.
Aron: Alright. That’s it. An old timer today say it’s June and it’s New Jersey. It hasn’t been this stalled, I think, in about a decade.