Despite getting $40 million in annual public subsidies, Blue Cross and Blue Shield of Maryland is failing to meet its traditional commitment to insure the state's most desperate citizens, according to company and government documents and interviews with policy-makers.
Money intended to support Blue Cross' "open-enrollment" program for people with nowhere else to turn for health coverage appears to benefit the company much more than those it is supposed to help. Indeed, Blue Cross spends almost none of its huge subsidies on the most insurance-needy.
Today, the company long hailed as the state's "insurer of last resort" covers just 4,500 people through open enrollment -- less than 1 percent of the more than 700,000 Marylanders who lack insurance.
And, even for them, the program has serious flaws.
Although all comers, regardless of medical history, are eligible, the plan is open to new members just two months a year. It charges much more than many needy people can afford. And it often doesn't cover their most serious health problems.
Cheron and Darrell Wicker of Columbia, uninsured parents of two ailing children, found the program useless. Their baby daughter's heart problems and son's asthma -- the main reasons they needed a policy -- would have been excluded for many months.
Worse, "the cost was prohibitive, but then it did not cover things like prescriptions," Ms. Wicker said. "It was stupid. It left such a bad taste in my mouth I would never consider using them again."
Blue Cross President and Chief Executive William L. Jews forcefully denied that the company neglects its duties and argued that Marylanders are getting full benefit from the lucrative subsidies.
"I don't think you, the legislature or the policy folks necessarily appreciate the value of this company," he said, adding, "we give more, do more" than open enrollment.
But questions about Blue Cross' open-enrollment program are growing, casting doubt not only on whether the company is making proper use of the subsidies but also on its historic role. Blue Cross' identity as a nonprofit, tax-favored company may be obsolete, some believe.
Blue Cross sparked concern about its nonprofit status a year ago when it announced plans to split into new nonprofit and for-profit businesses. Although corporate restructuring most likely will be delayed another year, Mr. Jews disclosed Wednesday, the open-enrollment program's failings are stirring new doubts about the company's role and tax advantages.
Blue Cross is trying hard to persuade legislators that it should hold on to its nonprofit advantages well into the future. But evidence to the contrary is mounting.
The federal government decided a decade ago to tax all Blue Cross plans, reasoning that they were run more like for-profit companies and weren't yielding enough public benefit. Now that state policy-makers are re-examining Blue Cross' role and future, Maryland should think about doing the same thing, some regulators and legislators believe.
"It's difficult for me to perceive a lot that differentiates them other than that they claim they're an insurer of last resort for open-enrollment purposes -- and I think that's a weak claim," said state Insurance Commissioner Dwight K. Bartlett III. "They don't really insure many people under that open enrollment."
The price that Maryland pays for open enrollment is high. The General Assembly protects Blue Cross' $11 million, nonprofit tax exemption largely because it offers open enrollment. Regulators also grant Blue Cross an additional $29 million in annual hospital discounts -- which boosts hospital prices paid by other Maryland health insurers, some argue -- to keep the program affordable and widely available.
And some people question whether the state gets its money's worth.
"I'm not sure" Blue Cross' annual subsidy "is worth what they provide," said Del. John A. Hurson, majority leader of the House of Delegates. "What we ought to try to be doing as a state is measuring what the value is of having an insurer of last resort."
Open-enrollment subsidies date back nearly 20 years.
Once, Blue Cross insured everybody for the same price. But in the early 1970s, Blue Cross and other insurers started charging higher prices to the older and the sicker. Alarmed that increasing numbers of Marylanders couldn't afford or obtain coverage, regulators launched the subsidy program.
It was supposed to encourage insurers to sign up people whose health or employment situations prevented them from qualifying for a regular policy. The subsidies -- a 4 percent discount off hospital charges -- are intended as compensation for the extra costs insurers risk by covering the sicker patients that come with open enrollment, said Robert B. Murray, executive director of Maryland's Health Services Cost Review Commission.
Little state oversight
But Blue Cross today reaps its millions in open-enrollment subsidies with little state oversight.