Despite merger, little change seen now for CareFirst In 6 months, it will be joined with FreeState Health Plan.

April 02, 1991|By Ross Hetrick | Ross Hetrick,Evening Sun Staff

The purchase of CareFirst Inc. by Blue Cross and Blue Shield of Maryland should not cause any immediate changes in service at the health-maintenance organization, according to John A. Picciotto, vice president and chief legal counsel for Blue Cross.

"There will be no change for CareFirst members or the physicians that contract with them," Picciotto said.

However, Blue Cross does intend to merge the CareFirst operation with its FreeState Health Plan in the next six months. As part of this consolidation, Blue Cross will review whether all the sites for both HMOs will remain open, Picciotto said.

David D. Wolf, the president of CareFirst, will continue to run the HMO, a Blue Cross spokeswoman said.

CareFirst, one of the state's largest HMOs with 118,000 members and 40 sites, was taken over by the state Insurance Division on Feb. 21 after an examination found that two of the firm's major divisions had a combined negative net worth of about $8.9 million. That was $11.7 million below state net-worth requirements.

In late February, Blue Cross offered to buy CareFirst for an undisclosed sum.

The purchase of CareFirst was completed yesterday afternoon after Baltimore Circuit Court Judge Joseph H. H. Kaplan dismissed the suit by state regulators against the financially ailing CareFirst. The dismissal was requested by the state to clear the way for the purchase.

Blue Cross now has nearly 300,000 HMO members or about one-fourth of all HMO members in Maryland.

The sale also allows the state to have more control over Blue Cross. Under its agreement with the Insurance Division, Blue Cross must restructure its own health maintenance organizations, Columbia-FreeState Health System, and move unregulated subsidiaries into the regulatory sphere of the state Insurance Division.

Under the agreement, Blue Cross has six months to dissolve at least nine Columbia-FreeState subsidiaries that are unregulated because they are not insurance companies.

The subsidiaries would either be converted to operating divisions of the Columbia Medical Plan Inc. or be dissolved. Columbia Medical is the other half of the Columbia-FreeState system.

The affected subsidiaries are: Twin Knolls Pharmacy, Patuxent Medical Group, Columbia Dental Plan, Patuxent Surgicare Inc., Patuxent Medical Laboratory Inc., Judgment Process Co., Columbia FreeState Optical, Free State Management Co. and Columbia Free State Management Co.

Blue Cross' HMOs must also operate separately from the rest of Blue Cross and quarterly reports on the HMOs must be filed with the Insurance Division.

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