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SUBSTITUTE H.B. 425 LABELED 'DISCRIMINATORY'; WOULD ULTIMATELY HARM OHIO POLICYHOLDERS

 Community Mutual Tells Legislators Proposal Is Bad for Ohioans
 COLUMBUS, Ohio, Nov. 11 /PRNewswire/ -- Ohio's largest health insurer told members of the General Assembly today that the substitute version of House Bill 425 is "anti-competitive, anti-free-enterprise legislation" that would cripple three of the state's largest health insurance companies and ultimately harm millions of Ohio policyholders.
 Community Mutual Insurance Co., in a letter to legislators, said that passage of the measure would seriously harm the three Ohio mutual insurance companies that are or once were members of the Blue Cross and Blue Shield Association by limiting their ability to raise much-needed capital and by crippling their ability to adapt to rapid changes in the health care industry.
 "Although H.B. 425 has been altered and a substitute version accepted by the House Health and Retirement Committee, Community Mutual feels the changes incorporated in the substitute bill are cosmetic, and have not altered the fundamental flaws contained in the bill," said James T. Parker, Community Mutual's vice president/government relations. Parker said the letter was being sent to all legislators "because of the visibility proponents have sought to attach to the bill."
 "The only organized proponent of H.B. 425 is Cleveland Blue Cross, which, for reasons we feel have little to do with seeking to protect policyholders, is asking the legislature to place particular restrictions on the ability of Ohio's Blue Cross companies to compete on an equal basis with other market competitors," Parker said.
 "Community Mutual's principal opposition to Sub H.B. 425 is that it continues to apply to only three Ohio mutual insurance companies, and therefore is punitive and discriminatory," Parker said. "Community Mutual also opposes Sub H.B. 425 because it would greatly hinder the ability of these companies to raise capital and, thus, their ability to compete with other insurance companies. In the long run, these restrictions threaten not only their competitive position, but their very existence," he said.
 BILL UNFAIRLY SEGREGATES THREE MUTUAL INSURANCE COMPANIES FROM ALL OTHER MUTUAL COMPANIES BY LIMITING THEIR ABILITY TO RAISE CAPITAL
 Parker said there was "no policy justification" for singling out three companies from all other mutual insurance companies. He quoted Department of Insurance Director Harold T. Duryee, who was asked during testimony on the bill whether Ohio's Blue Cross companies should be regulated differently than other Ohio mutual insurance companies. "No," Duryee said. "We regulate them adequately now as mutual insurance companies."
 Citing numerous experts on the need for insurance companies to raise capital in order to remain competitive, Parker noted that mutual insurance companies have no way to raise capital other than by raising premiums paid by their policyholders, by developing subsidiaries and selling portions of their subsidiaries' stock to the public, or by converting to stock companies.
 "In effect, Sub. H.B. 425 would place three companies at such a competitive disadvantage that they would eventually be destroyed by their competitors," Parker said. "These three companies alone should not be prevented from making the kinds of strategic organizational decisions that other mutual insurance companies are making to competitively position themselves for the future."
 SUB. H.B. 425 -- LIKE THE EARLIER 'FORCED MERGER' LEGISLATION -- WOULD BE UNCONSTITUTIONAL
 Community Mutual's letter said Sub. H.B. 425 denies three companies, and only these three companies, equal protection under the constitution because it singles them out based solely on the now-insignificant fact that they were created a decade ago through the merger of a hospital service association and a mutual insurance company.
 DIVERSIFICATION STRENGTHENS INSURANCE COMPANIES AND LEADS TO HEALTHY COMPETITION IN THE INSURANCE INDUSTRY
 Parker noted that diversification through the creation of for-profit subsidiaries and expansion into "non-Blue Cross" product lines has helped Ohio's Blue Cross companies to diversify their risks, continue to grow, gain greater financial stability and build their policyholder surpluses, which he called "the best kind of policyholder protection."
 Parker continued, "Prohibiting such activities would harm the policyholders of these companies by hindering their companies' ability to compete with other insurance companies which have expanded their insurance and insurance-related service operations."
 Parker provided the legislators with charts showing the for-profit subsidiaries already owned by the three affected companies. And he said that Community Mutual's recent purchase of Home Life Financial Assurance Corporation has already begun to have a positive impact on Community Mutual's financial position, noting that in its first quarter of operations as a Community Mutual affiliate, Home Life contributed pre- tax earnings of more than $6 million to Community Mutual's bottom line.
 "The sponsors of Sub. H.B. 425 have argued that the operation of for- profit subsidiaries endangers the financial health of Blue Cross companies. This could not be more wrong," Parker said. "The financially strongest Blue Cross companies are also the most diversified."
 THE LEGISLATION WOULD CREATE ANOTHER UNNECESSARY BUREAUCRACY
 Sub. H.B. 425 still contains a provision creating a "Committee to Improve Delivery of Ohio Health Care Services," Parker said, "despite the fact that just last year, the General Assembly created the Ohio Health Care Board, which represents insurers, employers, government, senior citizens, union leaders, hospital administrators and doctors.
 "The new committee created by H.B. 425 would have duplicate responsibility for issues currently within the jurisdiction of the Ohio Health Care Board," Parker said, calling the creation of a new committee "duplicative and unnecessary."
 -0- 11/11/93
 /CONTACT: Lora Peters, 513-872-8192, or Jim Parker, 614-460-3327, both of Community Mutual/


CO: Community Mutual Insurance Company ST: Ohio IN: INS SU:

AR -- CL024 -- 3427 11/11/93 17:40 EST
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Date:Nov 11, 1993
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