NEW YORK (Reuters) - New York City is trying to block two nonprofit health insurers from converting to a for-profit company by questioning if it was legal to grant stock options to the chief executive officer of one of them, Mayor Michael Bloomberg said on Tuesday.
Bloomberg noted the city had received its health insurance from the two companies -- Health Insurance Plan of Greater New York and Group Health Incorporated -- for more than 60 years, adding: “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.”
The state stands to reap nearly $1.8 billion over several years from the conversion as it would be the biggest shareholder in the new combination.
But Bloomberg fears the city won’t be able to afford the higher insurance premiums for public employees and retirees that he said will result from the conversion.
The mayor, who has been bashing the deal for months, said health-care costs could climb by hundreds of millions of dollars.
Bloomberg said in a statement he had sent the state insurance superintendent a memo outlining his objections to the granting of stock options to HIP’s chief executive.
“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’,” the mayor said in a statement.
A spokesmen for Eric Dinallo, the insurance superintendent, said that after holding public hearings, the department requested more information from the new company that would be formed from the nonprofits.
CONVERSION MUST BE ‘FAIR,’ NY SAYS
The state has told Dinallo that in order to approve the conversion, he must find that it will not hurt contract holders and members, and protect the interests of New Yorkers.
Further, the conversion must “result in the fair, equitable and convenient” winding down of the two companies’ affairs, the insurance spokesman explained.
Dinallo will consider the mayor’s latest criticisms though they were made after the deadline, his spokesman added.
A spokesman for EmblemHealth, the new company that would be created from the two nonprofits, said it was premature to comment before the deal was approved, adding that the independent directors and the shareholders would decide whether to grant stock options.
New York state is the largest shareholder, the EmblemHealth spokesman added. Since nonprofits are regulated by the state, it holds the value of nonprofits that go public, so a conversion would benefit the state rather than New York City.
Editing by Jan Paschal
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