A compromise bill regarding the reserves of the state's largest health insurer was reached just after 9:30 p.m. Monday, clearing the way for passage of a Fiscal Year 2018 state budget and an end to the three-day state government shutdown.
Gov. Chris Christie said he would wait all night Monday into Tuesday until both houses of the Legislature vote on both bills, to ensure that the state can reopen in time for the Fourth of July holiday Tuesday morning.
The new bill sets a cap on Horizon Blue Cross Blue Shield of New Jersey’s reserves at 725 percent Risk Based Capital, a metric used throughout the insurance industry, and mandates a minimum of 550 percent RBC.
The bill, S-2, also adds two members to Horizon’s board, increasing it to 17 members, with one appointment from the state Senate president and one from the Assembly speaker.
In addition, the state Department of Banking and Insurance will determine new transparency rules to make filings from all insurance carriers publicly available.
The announcement of the compromise came 10 hours after Horizon CEO Robert Marino met with both the Senate president, Stephen Sweeney (D-West Deptford) and the Assembly speaker, Vincent Prieto (D-Secaucus) face-to-face on Monday.
Sources told NJBIZ that, without the face-to-face meetings, which lasted until minutes before the announcement, the bill would likely not have been produced so quickly.
Sweeney told reporters that what helped change the bill was all parties, including Horizon, sitting at the same table to discuss it.
One of the major sticking points in the negotiations was a part of state Sen. Joseph Vitale’s (D-Woodbridge) original bill, which passed the full Senate last week, that would turn the clock back on Horizon’s structure: becoming the insurer of last resort.
NJBIZ has previously reported that that designation would disrupt the Affordable Care Act marketplace and could send Horizon back into insolvency — which it faced in 1992 before the state changed its designation.
In the public battle over the state’s attempt to grab funds from the insurer’s reserves, Horizon maintained a low profile for Marino, while pursuing an aggressive public relations campaign —which Christie repeatedly criticized — that helped alter the conversation.
But sources told NJBIZ that keeping Marino away from the public eye helped focus the conversation around the legislative process, politics and egos, and kept Horizon out of the leadership fight.
That is, until Marino entered the State House on Monday, and lawmakers were finally able to agree on the bills.
“When I spoke to (Christie) tonight, he will be signing the budget as we have it,” Sweeney said. The approval would end the government shutdown, which was prompted by the failure to pass a budget by a constitutionally mandated July 1 deadline.
Christie called the Horizon bill a win.
“It reforms them significantly ... and caps their reserves, which is what bothered me from the beginning,” he said.
But just how much the state will ever get out of the insurer remains unknown, since the RBC rate doesn’t signify the insurer’s financial health, sources have said.
NJBIZ previously reported that the amount the insurer has been able to tuck away into reserves has decreased annually since the ACA was implemented, and the last time it surpassed 725 percent was during the recession.
But Christie said that, even though it doesn’t mean immediate money returned to subscribers, and no money at all for the state, it is a significant reform of the dominant market player.
He said that, if the insurer continues building its reserves at the rate it has been, and if “they continue to bill Medicaid at the rate they have been billing, and profiting from them, that cap will come into effect very soon.”
The bill passed the Senate with a 33-1 vote, and the Assembly with a 71-2 vote.
The budget passed in the Assembly with a vote of 53-23 and one abstention, and with a vote of 21-14 in the Senate.