Missouri Blues Agree To Transfer Millions to Charity


Blue Cross and Blue Shield of Missouri has tentatively agreed to transfer its stake in its for-profit managed care subsidiary to a new not-for-profit health care foundation. The deal settles a two-year-old legal battle with Missouri Attorney General Jay Nixon about whether Blue Cross broke state law by transferring charitable assets to the subsidiary, RightChoice Managed Care, which began operations in 1994.

Missouri law requires a charity to hold its assets in trust for the people of the state and to compensate the people for any assets it converts to for-profit use. Nixon argued that Blue Cross shifted as much as $500 million to RightChoice, a charge the plan denied. A state court ruled against Blue Cross in March. RightChoice accounts for most of Missouri Blue Cross's revenue and runs its managed care plans.

The foundation will not be run by Blue Cross or Right- Choice, although Blue Cross will retain voting control of the shares it transfers, in order to discourage hostile takeover attempts. Blue Cross owns more than 80 percent of Right- Choice stock, a stake that was worth more than $175 million in late May.

The settlement will help Blue Cross restore good relations with state regulators, according to the company's president, John O'Rourke. The two sides are negotiating a final settlement that will include the timing of the transfer of shares. Any final deal must be approved by state and federal regulators and the Blue Cross and Blue Shield Association.

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