ACQUISITION OF OHIO BLUES BARRED; ANTHEM PROPOSED AS LICENSEE

CLEVELAND

The Ohio Department of Insurance ruled against Columbia/HCA Healthcare Corp.'s proposed $299.5 million purchase of Cleveland-based Blue Cross & Blue Shield of Ohio last week.

Separately, the national Blue Cross & Blue Shield Assn. designated Indianapolis-based Anthem Inc., another Blue Cross & Blue Shield licensee, as the replacement licensee for the Cleveland operation, assuming a federal appellate court decision goes in its favor and it can terminate the license of BC/BS of Ohio (BI, Nov. 11, 1996).

In its notice disapproving the Columbia/HCA acquisition, the Ohio Insurance Department said in part that the move would enfranchise the mutual insurer's policyholders "by abrogating their rights and interests and will fundamentally alter the character and structure of a domestic mutual insurance company" in violation of state code. Blue Cross has 30 days to file for a hearing.

John Burry Jr., Blue Cross & Blue Shield of Ohio's chairman and chief executive officer, said in a statement that he regrets the decision and "we will be in discussions with both the Department of Insurance and with Columbia to determine" its next steps.

A spokeswoman for Nashville, Tenn.-based Columbia said the company still is looking at the decision's implications.

Patrick G. Hays, the national BC/BS Assn.'s president and CEO, said that giving Anthem the Cleveland operation's license is an effort to protect the integrity of the association's trademark.

Blue Cross & Blue Shield of Ohio is now seeking to overturn a federal district court decision in November allowing the national association to terminate the Ohio plan's license to use the Blue Cross & Blue Shield names and trademarks. A decision by the federal appellate court in Cincinnati is expected within a few weeks. The national Blues organization and many other Blues plans see a takeover by a for-profit health care giant as an unprecedented shift away from the Blues' traditions and heritage.

Mr. Hayes said the Insurance Department's rejection of the acquisition does not alter the association's decision to transfer the license. It will be up to policyholders as to whether they plan to move to Anthem, he said.

Mr. Burry said in a statement that any effort by the association to interfere with Blue Cross & Blue Shield of Ohio's ability to operate as a BC/BS plan would violate a stay granted by the federal appellate court. A spokeswoman for the Cleveland operation said it has not received formal notification of the national association's license decision and is awaiting the federal appellate decision.

Meanwhile, St. Louis-based Blue Cross & Blue Shield of Missouri and its RightCHOICE Managed Care Inc. unit said they have ended discussions with St. Louis-based BJC Health System concerning a possible alliance or business combination.

401(k) proposal under review

HARTFORD, Conn.-Travelers Group is awaiting U.S. Labor Department approval to contribute options on its own stock rather than cash to employees' 401(k) plan accounts.

Under the proposal, Travelers would give employees stock options worth 10% of their salary, up to a $40,000 salary. Employees would receive the right to buy Travelers stock at the closing price on the New York Stock Exchange the day before the grant of the option. The right to exercise the option would expire after 10 years. While the stock options would vest when employees get them, they only could be exercised at the rate of 20% a year.

An option gives an individual the right to purchase stock at a later date at a certain price.

Contributing options would conserve a company's cash, but if the stock price were depressed for an extended period of time, the options would have little value.

The Labor Department's decision on the proposal could come as soon as this week.

Court denies partner benefits

TRENTON, N.J.-A New Jersey appeals court has rejected the attempt by five faculty members of state-supported Rutgers University to extend benefits to cover domestic partners.

The faculty members, four professors and one dean, attempted in 1992 to enroll their same-sex domestic partners in the university's health plan that covers the state's employees. After their attempt was denied, they sued the state and the university.

In rejecting their suit against the state, the Superior Court of New Jersey Appellate Division sitting in Trenton ruled that the domestic partners did not qualify as spouses under the language of the New Jersey law establishing the plan.

"It is not for this court to agree or disagree with the Legislature's decision on such issues," Judge Thomas Shebell wrote for the court. "These are political and economic issues to be decided by the elected representatives of the people."

Lawyers for the plaintiffs criticized the reasoning. "They are wrong in thinking they do not have the authority to strike this down as in violation of the New Jersey Law Against Discrimination or the constitution," said Lenora Lapidus, an attorney with the New Jersey chapter of the American Civil Liberties Union who represented two plaintiffs.

The court also rejected the plaintiffs' arguments that the state's anti-discrimination law prohibits their partners' exclusion by stating the law does not apply to benefit and insurance plans.

In a separate concurring opinion, Judge David Baime said although the statute "indirectly discriminates against homosexual domestic partners," it is up to the state to make any change.

"It says the court recognizes and indeed admits the policy is discriminatory vs. gay and lesbian employees," said Rosemary Di-Savino, an attorney with Ball Livingston, a Nutley, N.J.-based law firm that represented three plaintiffs. "However, the court has stopped short of remedying the discrimination."

Ms. DiSavino said her clients plan to petition the New Jersey Supreme Court to hear an appeal. She added that separate but related claims still exist against Rutgers that will proceed after a decision by the Supreme Court.

Storm damage at $265 million

RAHWAY, N.J.-The severe thunderstorms and rainfall that battered much of the nation's midsection in late February and early this month caused an estimated $265 million in insured property damage, reports the Property Claim Services division of the American Insurance Services Group.

The violent weather hit hardest in portions of seven states stretching from Texas to West Virginia (BI, March 10). A tornado devastated Arkadelphia, Ark., causing damage to an area of roughly 80 blocks in that city of 10,000. Tornadoes and high winds also caused damage throughout much of the Ohio Valley, where floodwaters have yet to recede completely.

Gary R. Kerney, assistant vp of the PCS, estimates insurers will receive 133,500 claims as a result of the storms.

Reinsurers report growth

WASHINGTON-Reinsurers reported a 4.5% increase in net premiums written to $18.9 billion last year, compared with $18.1 billion written in 1995 by the same group of 49 reinsurers, according to a survey by the Reinsurance Assn. of America released last week.

The sampling also showed an improvement in the reinsurers' combined ratio. The combined ratio stood at 103.5% last year, an improvement over the 109.9% registered by a similar group of companies in 1995. Policyholder surplus also grew to about $23.7 billion in 1996, from $21.5 billion for a similar group in 1995.

US Airways settles suit

COLUMBIA, S.C.-US Airways Inc. settled last week with eight families of victims of a July 1994 crash near Charlotte, N.C., that killed 37 people (BI, July 11, 1994).

The recent settlements are in addition to those reached during a U.S. District Court trial in Columbia, S.C. The jury found March 7 that US Airways, which recently changed its name from USAir, was negligent in connection with the crash.

The company now has settled with more than a dozen of the original 26 litigants in the case, a company spokesman said. The airline settled with families of other victims before the litigation began.

While declining to disclose the financial details, the US Airways spokesman said the company is insured for the settlements. The airline's lead insurers are Associated Aviation Underwriters of Short Hills, N.J.; United States Aircraft Insurance Group Inc. of New York and Paris-based La Reunion Aerienne.

PBGC plan termination rules

WASHINGTON-The Pension Benefit Guaranty Corp. last week proposed new rules to ease administrative burdens for employers terminating fully and overfunded pension plans.

The new rules would give employers more time to meet various deadlines associated with terminating fully funded plans. For example, the deadline for filing a standard termination notice with the PBGC would be extended to 180 days from 120 days after the proposed termination date.

Plan administrators also would have up to 120 days-up from the current 60-day maximum-to distribute plan assets after receiving a clearance letter from the Internal Revenue Service.

In addition, the PBGC has developed a model notice of intent to terminate a fully funded plan that employers could use to inform plan participants of the intended plan termination and the effect it would have on their benefits.

Separately, the PBGC said it will not assess financial penalties on employers in areas of the country hit by floods whose PBGC termination insurance premium payments were due by Feb. 28. Premiums now are due by April 30.

Briefly noted

NAC Re Group has received a ratings upgrade from A.M. Best Co. The ratings agency raised the rating to A+ from A to reflect the company's "strong operating earnings, conservative loss reserves, superior capitalization, and leadership position within the domestic reinsurance segment." A subsidiary, NAC Re International Ltd., also had its rating upgraded to A+ from A. . . .Steve Shulman, formerly the president of Value Health Inc.'s pharmacy and disease management group, has been appointed president and CEO of Prudential Healthcare. Mr. Shulman, a founder of Value Health in 1987, will direct managed health care for the Roseland, N.J.-based Prudential unit. Value Health recently announced its planned sale to Nashville, Tenn.-based Columbia/HCA Healthcare Corp. . . .An Illinois Senate bill to increase regulatory oversight of the Illinois Insurance Exchange passed its first hurdle last week when the senate's Insurance and Pensions Committee approved it. . . .A state court judge in Texas reduced to $16.75 million the award to two California restaurant executives who sued American Airlines for injuries from a car accident they blamed on the airline's giant information signs at Dallas-Fort Worth Airport (BI, Dec. 9, 1996). Compensatory damages were cut by $7.75 million in the original award of $24.5 million while a $10 million punitive award was not reduced. . . .Mississippi will proceed with its suit against tobacco companies after the state Supreme Court last week rejected Gov. Kirk Fordice's request for a ruling that the state's attorney general had no authority to sue to recover the cost of treating smoking-related illnesses. . . .Michael G. Bungert has been named president and CEO of the U.S. reinsurance brokerage operations of Aon Re Worldwide Inc. in Chicago.