Emblem for-profit status back on the table?

Bloomberg Predicts Fair Deal if Health Insurer Gets For-Profit Status

Published: December 23, 2011

Mayor Michael R. Bloomberg said Friday that he expected an agreement would be reached to satisfy the city’s concerns about a plan backed by Gov. Andrew M. Cuomo to allow a major nonprofit insurer to be converted into a for-profit company.

The conversion of the insurer, EmblemHealth, which provides health coverage for most New York City public workers, would most likely provide at least $1 billion in one-time revenue for New York’s cash-hungry state government.

The Bloomberg administration has objected for years to such a move, saying it could drive up the city’s health insurance costs. But on Friday, although there was no evidence that a deal was imminent, the mayor said he had “no interest in stopping the governor from getting a billion dollars for the state budget.”

“We will find some way, I’m convinced,” Mr. Bloomberg said on his weekly radio program on WOR-AM (710). He added: “If it looks like a good deal for the city, or the city doesn’t get hurt — because we do get benefits when the state gets money because it stops them from cutting us back — we’re going to be there. And I think that’s the way it will work out.”

Emblem first initiated the process of becoming a for-profit company during the administration of Gov. Eliot Spitzer, and the State Legislature approved rules in 2007 on how such a conversion could take place.

The city unsuccessfully sued in federal court in an effort to block the merger of the two insurers that now make up Emblem, Group Health Inc. and the Health Insurance Plan of Greater New York, and the city has since that time urged state regulators to prevent the combined company from becoming for-profit.

Emblem put its efforts on hold in mid-2008. But the company and state officials in recent months have been preparing to proceed, most likely in an effort to sell Emblem to another insurer, according to several state officials who have been briefed on the matter. A spokeswoman for EmblemHealth declined to comment.

Some lawmakers suggested this month that the Emblem issue had become linked to the tense negotiations between Mr. Cuomo and Mr. Bloomberg over legislation to allow livery cabs to be hailed on most New York City streets. They said they suspected that Mr. Cuomo was holding out approval of the livery deal in an effort to press Mr. Bloomberg into agreeing to drop the city’s resistance to the Emblem deal.

A spokesman for Mr. Cuomo insisted that was not the case. Mr. Cuomo signed the livery cab legislation this week.

“The city has been arguing the same point for five years — if there is an Emblem sale, they want more of the proceeds than the Legislature has previously authorized,” the spokesman, Josh Vlasto, said. “However, the entire issue is irrelevant because there is no potential sale on the horizon.”

A high-ranking state official said Mr. Cuomo’s budget proposal, which he will unveil next month, would not presume any revenue from a possible Emblem deal.

If Emblem does find a buyer, Mr. Bloomberg would have considerable leverage in trying to win concessions from the insurer.

Mr. Bloomberg noted in his radio appearance that Emblem would be worth far less if the city — the insurer’s biggest customer — took its business elsewhere. And the city is keeping its options open; about a month ago, it circulated a request for information from other health insurers as the Bloomberg administration considered seeking other possible providers.

“If we didn’t exist, they would still exist, but they would be worth a lot less in the marketplace,” Mr. Bloomberg said of Emblem. “So that’s why everybody cares, and nobody is going to buy Emblem unless they talk to the city.”

Mr. Bloomberg hinted that it was possible, for example, that as part of a sale, the city would pledge to keep its business with Emblem for a certain period of time. In return, the city might ask Emblem to promise that health insurance rates would not increase more than a certain percent annually.

Harry Nespoli, the chairman of the Municipal Labor Committee, the umbrella group for the city’s public employee unions, said labor leaders had expressed concerns to Mr. Cuomo’s office about how a possible conversion would affect workers’ benefits.

“The exact services that our members have and the structure for our health coverage has to be the same,” Mr. Nespoli said in a telephone interview. “If it’s going to affect our members, we are definitely going to get louder with our voices.”