Judges decline to block Horizon reorganization

Lawsuit said state failed to show new structure would benefit policyholders

By: - May 31, 2023 2:56 pm

A three-judge panel found Horizon provided proper notice to policyholders, dismissing claims that the new structure would hike premiums. (Getty Images)

An appellate panel on Wednesday upheld a state insurance regulator’s decision to allow Horizon to reform as a mutual holding company, dismissing claims that the reorganization strayed from its legal process and would raise insurance premiums.

Horizon has sought to reorganize to avoid limits on its investments, shed a unique tax charged on its premiums, and remove revenue caps imposed on certain services, like Medicaid.

“We are pleased that the court unanimously upheld the Department of Banking and Insurance’s approval of Horizon’s reorganization, and we are confident that the reorganization will benefit the millions of New Jerseyans who are Horizon policyholders,” said Jennifer Sciortino, a spokesperson for Gov. Phil Murphy.

The suit lodged by New Jersey Citizen Action and nurses’ union Health Professional and Allied Employees alleges the Department of Banking and Insurance incorrectly found the reorganization would not raise insurance premiums.

The suit also claims the reorganization did not follow rules set by 2020 legislation that allowed Horizon to move to the new corporate structure, including by notifying policyholders about the proposed reorganization only after it had been approved by state regulators.

But the three-judge panel found no error in Horizon’s notifications, and dismissed as meritless a separate claim that the insurer notified only pro-reorganization members about the pending shift ahead of public meetings held last October.

“Nothing about the notice provided by the commissioner leads us to the conclusion it targeted only pro-plan commentators,” the judges wrote.

The panel sided with regulators on insurance premiums, noting a state report on the reorganization found Horizon’s premium tax liability would be reduced by more than 85%, savings the insurer could pass onto consumers.

Further, the judges found bylaws and other materials not released to the public ahead of October’s public hearings were properly shielded from disclosure, adding they were “unconvinced the revelation of this information at the public hearings would have led to a different result.”

“We’re disappointed with the court’s decision, and we stand by our assertion that the commissioner’s decision is not supported by the evidence and contrary to the legislative intent,” said Maura Collinsgru, director of policy and advocacy for New Jersey Citizen Action.

Commissioner refers to Marlene Caride, commissioner of the state Department of Banking and Insurance.

Horizon, New Jersey’s largest health insurer and the only nonprofit of its kind in the state, has said it needed to reorganize its corporate structure to reduce its tax burden and remove regulatory hurdles it said made it uncompetitive with for-profit insurers.

“Becoming a mutual holding company provides Horizon with the operational flexibility needed to continue meeting the rapidly changing expectations and needs of our customers and members,” said Thomas Wilson, a Horizon spokesperson. “Today’s decision affirming Commissioner Caride’s approval supports Horizon’s customers and members while promoting a more competitive health insurance marketplace in New Jersey.”

The insurer — which covers 3.7 million members, including more than 800,000 enrolled in public worker health plans —was not a party to the suit.

As part of its reorganization, Horizon was due to pay the state $600 million in June to make up for a $50 million reduction in its annual tax burden, but that payment remained in limbo while the suit was ongoing.

The $600 million payment could reach state coffers as early as Thursday, though that payment and $650 million in other payments Horizon is expected to make over the next 17 years could still be waylaid by an appeal to the New Jersey Supreme Court.

It’s not clear whether such an appeal will come. Collinsgru said New Jersey Citizen Action was “currently exploring all of our options moving forward.”

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Nikita Biryukov
Nikita Biryukov

Nikita Biryukov most recently covered state government and politics for the New Jersey Globe. His tenure there included revelatory stories on marijuana legalization, voting reform and Rep. Jeff Van Drew's decamp to the Republican Party. Earlier, he worked as a freelancer for The Home News Tribune and The Press of Atlantic City.