Plans in California, Georgia and Virginia have converted completely to for-profit status. Three others, in Wisconsin, Missouri and New York, are in the process of converting. In Missouri, regulators demanded that Blue Cross put money into a foundation when it moved its managed care business into a for-profit subsidiary in 1994. The company resisted and lost in the courts. Determining how much money should be turned over is a complex process that can involve tracing the flow of money from the nonprofit to its for-profit subsidiaries, often over many years.
Laws governing charitable conversions vary from state to state.
The North Carolina legislature passed the law in 1998 to stop Blue Cross plans from inching toward for-profit status and whittling down their nonprofit operations. A lot of the value of the public is diluted in a creeping conversion. At the point a Blue Cross plan would actually convert, there would be very little left in the nonprofit that could be captured for the public. We wanted to prevent that mischief. At Independence, for-profit subsidiaries generate nearly 90 percent of all premiums.