[Congressional Record Volume 144, Number 10 (Wednesday, February 11, 1998)]
[Extensions of Remarks]
[Pages E135-E136]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




        PRESERVING THE DISTRICT OF COLUMBIA'S CHARITABLE ASSETS

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                      Wednesday, February 11, 1998

  Mr. STARK. Mr. Speaker, all across the United States, Blue Cross and 
Blue Shield health insurance plans are changing their stripes through 
mergers, conversions, other changes in corporate status, or buy-outs. 
As many of my colleagues know, these changes have triggered debate in 
many states over the fate of charitable assets of these plans. As one 
observer put it, ``The Blues see green. Consumers see red.''
  In California, for example, two new foundations have over $3 billion 
for health care, courtesy of the Blue Cross conversion. In New Jersey, 
an appeals court ruled last year that the Blues there are, in fact, 
``charitable and benevolent.'' In Texas, the attorney general is in 
court to block the merger between the Texas and Illinois Blues. In 
North Carolina, the state legislature set up a study commission to 
examine the fate of the Blues plan there. In Kansas, the attorney 
general has filed a claim against the officers and directors of the 
Blues for breach of their fiduciary duty in connection with their 
campaign to deny the charitable status of the assets.
  Each of these cases demonstrates that the tug-of-war over charitable 
assets is a state matter. Rarely, if ever, does Congress become 
involved, though perhaps the time is drawing near for a national 
examination of these trends.

[[Page E136]]

  Right in our own backyard here in the nation's capital, the 
Washington Blue Cross plan recently merged with the Maryland plan 
headquartered in Baltimore. This followed passage of HR 3025 at the end 
of the last session of Congress, facilitating the merger by amending 
the Federal charter of the DC Blues, which is the only Blue Cross plan 
nationwide to have been chartered by Congress rather than by a state. 
The merger is being challenged in two court actions brought by the Blue 
Cross policyholders and by a national patient advocacy foundation, who 
claim that the merger involves an illegal shift in control of 
charitable assets away from the intended beneficiaries. Lawyers for 
Blue Cross are citing congressional action on HR 3025 as a defense in 
the lawsuits.
  While HR 3025 modified the DC Blues' charter to change its provisions 
for membership, the legislation was silent on all issues involving the 
plan's charitable and benevolent status and the charitable nature of 
assets. A review of the last minute consideration of this legislation 
in November 1997 that Congress took no action to diminish the 
charitable status of the Blues plan, nor did Congress contemplate the 
effect of HR 3025 on the DC Blues' obligations arising from its 
charitable status.

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