New York's highest court, the Court of Appeals, today rejected the suit brought by Consumers' Union regarding the conversion of Empire Blue Cross/Blue Shield to for-profit status.
With a 4-2 vote, the Court dismissed the Consumers Union suit that challenged the transaction as unconstitutional. Empire did its IPO in late 2002, while creating a parent, WellChoice. Under the conversion plan approved by the State 95% of the funds (about $1 billion, was for salary supplements for healthcare workers, with the remaining 5% going to create a healthcare foundation. Arguing that salary increases were not a proper use of funds which had been amassed by virture of Empire's tax-exempt status, Consumers Union won a restraining order barring spending the money until there was a ruling on the conversion's legality. They favored other forms of community health initiatives.
For those concerned about the public policy issues involved in such conversions, this pretty much ends the debate in New York.
For those concerned with NYS finances and the age-old question, where's the money going, this means that the resulting funds the State was counting on for its own purposes are now secure. Hospitals and 1199 will get a substantial portion of the money. It also likely clears the way for the next conversion, that of HIP.