Tax windfall: Horizon to return $150 million to customers

Horizon Blue Cross Blue Shield of New Jersey will return $150 million from its tax windfall to its 3.8 million customers this year, company officials said Wednesday.

The state's biggest health insurer said it would take another $125 million from the GOP's federal income tax cuts and invest in mental health, primary care and substance abuse programs.

Horizon is "setting the bar for how corporations can responsibly reinvest in our communities," Gov. Phil Murphy said in a statement.

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The move is in the aftermath of the Tax Cuts and Jobs Act, a sweeping overhaul of the federal tax code that sharply reduced corporate taxes beginning this year.

Its impact on the economy isn't yet clear. Banks such as OceanFirst and Amboy increased their minimum wages to $15 an hour. And companies such as Comcast and AT&T doled out $1,000 bonuses.

The tax law has grown more popular since it was passed. Watch the video above.

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But a recent survey of 133 certified public accountants by the New Jersey Society of CPAs found:

50 percent said their corporate clients would benefit from the law.

More than 30 percent plan to use the money to reinvest in their business with new equipment or technology.

More than 20 percent plan to hire more employees or provide raises.

President Donald Trump's tax plan that provides big cuts for the wealthy and corporations is a similar economic strategy to Ronald Reagan in the 1980s, said Farrokh Langdana, a finance and economics professor at Rutgers Business School in Newark and New Brunswick.

One key difference: Reagan took over an economy that was languishing; Trump took over an economy that was already gaining momentum. It means companies are already flush and might use the extra money to reward shareholders instead, Langdana said.

"It's not clear companies are going to hire more workers or even pay them wage increases," he said.

Horizon executives had a different decision. They oversee a not-for-profit company that doesn't have shareholders.

The company has been in the spotlight in recent months. Most notably, former Gov. Chris Christie last summer wanted the company to provide $300 million from its $2.4 billion surplus to help fund his drug addiction treatment plan.

The feud resulted in the state shutting down over the Fourth of July weekend. And it ended with Horizon agreeing to modest reforms, but keeping its surplus untouched.

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Christie's successor now is the beneficiary. Horizon has paid the federal Alternative Minimum Tax and compiled $550 million through the program since 1986. The AMT was eliminated in the new tax law, but Horizon expects to be refunded the value of the credits each of the next five years.

It said it would work with the state Department of Banking and Insurance on a plan to return a total of $150 million to its members. The average refund for members hasn't been determined.

It also will invest millions more in a multiyear initiative, including what it says is its "already extensive efforts to prevent substance abuse and help members with addiction and substance use illness."

Its decision won praise from labor and business leaders alike.

Hetty Rosenstein, state director for the Communication Workers of America, said Horizon's focus on primary care and prevention would lower cost for its members who it covers. That could give taxpayers relief, too, since they pick up much of the cost of state workers' benefits.

"It's great that Horizon wants to put money into this model, because this is the key to good health across the board at a reasonable cost to the public,” Rosenstein said.

Rising health care costs have been a long-standing complaint among businesses, too.

"With this action, Horizon is not only sharing its returns to its large customer base, it is also making a strong investment in the health of our citizens and the soundness of New Jersey’s economy," Michele Siekerka, said president and chief executive officer of the New Jersey Business and Industry Association, a lobby group.

Michael L. Diamond; 732-643-4038; @mdiamondapp; 732-643-4038; mdiamond@gannettnj.com