2008-05-09 / Top Stories

Bloomberg Riles Against GHI-HIP Merger

Mayor Michael R. Bloomberg has released a memorandum sent to the New York State Superintendent of Insurance Eric R. Dinallo opposing the conversion of the non-profit health insurers Health Insurance Plan of Greater New York (HIP) and Group Health Incorporated (GHI) to a forprofit company. The memorandum challenges the rationale for the conversion and questions the legality of stock options that were reportedly promised to HIP chief executive Anthony Watson. The options, reportedly worth as much as $20 million, according to the memorandum likely violate Insurance Law § 7317, which provides that "The conversion transaction shall not result in inurement to any private person or entity." Deputy Mayor Edward Skyler first outlined the City's opposition to the conversion in testimony in January before a State Insurance Department Public Hearing.

"City workers and retirees, indeed all City residents, should not have their health insurance benefits endangered by this conversion to a single for-profit entity," said Mayor Bloomberg. "GHI and HIP have each provided quality health insurance benefits to New Yorkers for more than 60 years. The conversion to a single for-profit entity could increase health care costs by hundreds of millions of dollars, and threatens the health and financial well-being of City workers and retirees. We don't need City dollars intended to protect hard-working City employees and retirees used instead to pad the compensation of health care executives. This conversion should be rejected."

"The proposed conversion adversely impacts those currently insured by GHI and HIP and is bad policy for the State as a whole, thus failing each of the two standards State law requires be satisfied before the conversion can be approved," said Corporation Counsel Michael A. Cardozo. "The insurance superintendent in each State that has analyzed the merits of a health insurer converting to for-profit status in the last six years - Kansas, Maryland, Washington and North Carolina - has concluded that the conversion is bad public policy and rejected it. The recently reported increases in executive compensation demonstrate that this conversion is not necessary and will result in money intended for medical care to go to executives and stockholders. Accordingly, the City urges Superintendent Dinallo to reach the same conclusion reached in four other states and reject the conversion."

The two insurers have deep roots in New York City. GHI was formed in the City in the 1930s, and pioneered the provision of healthcare to working New Yorkers. HIP started operations in 1947 and was created by Mayor LaGuardia for the express purpose of providing affordable health insurance to New York City employees and other City workers.

The City, which currently pays $4 billion dollars to insure its employees and retirees, examined the records compiled by the insurance superintendents in the four states and reviewed the rationales put forward for this conversion.

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