Minnesota AG Swanson seeks law on for-profit health plan deals

Attorney General Lori Swanson is reminding lawmakers that a moratorium blocking nonprofit health plans from becoming for-profit companies is set to expire next year, and therefore requires follow-on legislation.

Swanson is highlighting the issue in a letter to Gov.-elect Tim Walz and legislative leaders that was obtained by the Star Tribune.

The attorney general, who is leaving office next year, pushed for the current moratorium on for-profit conversions following 2017 legislation that struck down a 40-year ban on for-profit HMOs in Minnesota.

"I write to bring to your attention an important provision that must be enacted into law this legislative session to protect Minnesota taxpayers from having billions of dollars in nonprofit health plan assets converted to for-profit use without providing sufficient compensation to the public for the value of those assets," Swanson wrote in the letter.

In May 2017, Gov. Mark Dayton signed into law a two-year moratorium that would block the state's nonprofit HMOs from being sold to for-profit companies. It was a compromise struck at the end of the legislative session after Republicans and DFLers couldn't agree on how to write a new law that would govern such transactions.

For decades, Minnesota required HMOs to be nonprofit, but Republicans pushed for opening the market to investor-owned companies. The law allowing for-profits didn't specify what sort of review would be required if a for-profit company attempted to acquire one of the state's nonprofit health plans, or if one of the nonprofit HMOs attempted a conversion on its own.

"With the expiration of the moratorium on July 1, it is critically important for the legislature to enact a strong conversion law this year," Swanson wrote. "If it fails to do so, Minnesota may repeat the troubling experience of other states where nonprofit executives received millions in financial payouts for presiding over for-profit conversions while giving taxpayers nothing for the value of nonprofit assets held for their benefit."

The state's nonprofit HMOs have received exemptions for various forms of taxation, Swanson wrote. In addition, the nonprofit HMOs have been hired by the state to administer public health insurance programs.

From 2002 to 2011, Minnesota paid nonprofit health plans more than $21 billion to administer Medicaid-managed care contracts, Swanson said in her letter. The health plans' collective operating profit was $430 million during the time period from the prepaid Medical Assistance program and MinnesotaCare, according to a state report.

"Their preferential treatment has resulted in Minnesota health plans accruing significant nonprofit assets," Swanson wrote in her letter. "In other states that lacked strong laws to regulate the disposition of assets when a nonprofit health plan 'converts' to for-profit status, health plan executives reaped millions of dollars in 'golden parachute' bonuses for presiding over conversions in which insufficient compensation was paid to the public for the value of the nonprofit assets being transferred to a for-profit corporation."

When the current moratorium was adopted in 2017, nonprofit HMOs in the state said they weren't interested in becoming for-profits.

Speculation swirled earlier this year that some sort of change could be coming for Eagan-based Blue Cross and Blue Shield of Minnesota, a nonprofit insurer that has increased ties with Indianapolis-based Anthem, the big for-profit operator of Blue Cross health plans. The new CEO at Blue Cross of Minnesota, a former Anthem executive, flatly rejected the idea of an Anthem takeover in comments to the Star Tribune this fall.

In early 2017, the Legislature eliminated the 40-year ban on for-profit HMOs as part of a bill to provide premium relief for those who buy health insurance in the state's troubled market for individual policies. Republicans said they hoped to promote competition in the market where individuals buy coverage, although new insurers haven't done so. For-profit insurers haven't yet received HMO licenses that would let them bid on the state public health insurance program business.