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Health Groups Eye Wisconsin Blue And CareFirst Conversions

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NU Online News Service, Jan. 9, 1:08 p.m. – Health groups are challenging a Blue Cross and Blue Shield conversion in Wisconsin and raising the possibility of attacking a proposed conversion in the Mid-Atlantic region.

ABC for Health, Madison, Wis., says it has asked the Wisconsin Supreme Court to require that all charitable proceeds from the transaction that created Cobalt Corp., Milwaukee, go to programs for the uninsured and under-insured, rather than letting some proceeds go to state medical schools.

Blue Cross & Blue Shield United of Wisconsin, Milwaukee, a nonprofit company, merged with a for-profit affiliate, United Wisconsin Services Inc., Milwaukee, to form Cobalt, a for-profit, publicly traded managed care company, in March 2001.

Wisconsin Blue gave $250 million to charity to compensate the people of the state for converting nonprofit assets to for-profit use.

Insurance Commissioner Connie O’Connell approved a conversion plan that called for 65% of the proceeds to go to the Medical College of Wisconsin and the University of Wisconsin Medical School, and the rest to go to public health initiatives.

A state appeals court ruled in favor of the conversion plan in December 2001, but ABC says it is continuing to fight the plan.

The state originally chartered Wisconsin Blue to help people who could not afford health insurance, and the state should continue that mission by ensuring that Wisconsin Blue assets go to programs with similar objectives, ABC argues.

Meanwhile, in the Mid-Atlantic, the Fair Care Foundation, Washington, says it has hired Richard Hubbard, the lawyer who heads the tax practice at Arnold and Porter, Washington, to help it monitor efforts by WellPoint Health Networks Inc., Woodland Hills, Calif., to acquire CareFirst Inc., Owings Mills, Md., for $1.3 billion in cash and stock.

WellPoint is a large, for-profit managed care company.

CareFirst is a nonprofit company that controls the Blue Cross and Blue Shield plans in Delaware, Maryland and the District of Columbia.

Before WellPoint can complete the CareFirst deal, which was announced in November, CareFirst will have to get permission from state regulators and the U.S. Congress to convert to a for-profit charter, according to CareFirst.

Fair Care fought a 1997 combination of Maryland Blue and D.C. Blue that created CareFirst, in part on the grounds that the combined company might agree to an acquisition by an out-of-state company.

A.G. Newmyer III, chairman of Fair Care, put out a press release saying his group now has concerns about the proposed WellPoint acquisition.

“We’re ready to pursue a fair outcome that maximizes access to quality care,” Newmyer says.