CareFirst conversion path eased

Legislature removes a barrier to switch to for-profit status

Vote no longer required

Consumer groups gearing up in event insurer opts to shift

April 11, 2001|By M. William Salganik | M. William Salganik,SUN STAFF

Advocacy groups are beginning to gear up in case CareFirst BlueCross Blue- Shield, the state's largest health insurer, seeks to convert to for-profit status.

Shortly before it adjourned Monday night, the General Assembly removed one potential barrier to conversion by dropping a requirement that CareFirst members vote on a conversion plan.

"It wasn't a major hurdle, as far as we were concerned," John Picciotto, CareFirst's executive vice president and corporate counsel, said yesterday of the vote, which he said would not have been binding on state regulators.

He declined to say, however, how the legislative action will influence CareFirst's consideration of whether to convert. "We don't comment on the current state of the discussions," he said.

Frank Chase, legislative chairman of the Maryland chapter of the National Association of Retired Federal Employees, said representatives of several health advocacy, consumer and senior organizations have started to talk about forming a coalition to weigh in on whether CareFirst should be allowed to convert and how to deal with any proceeds from a conversion.

Blue Cross plans, historically nonprofits, have changed in several states, saying for-profit status allows them to compete better with commercial insurers.

Chase said he hopes that a consumer coalition would form to start examining the issues even before CareFirst takes any action.

If CareFirst did decide to convert - it has told state officials over the past few months that it is seriously considering such an action - it would have to file a plan with the state insurance commissioner, who would hold hearings on whether such a change would be in the public interest.

T. Michael Preston, executive director of the Medical and Chirurgical Faculty of Maryland, the state medical society, said he expected that his group would be commenting on any conversion plan.

"The burden's clearly on the company to explain exactly what they have in mind and why," he said.

Until they see a plan, Preston said, the physicians are skeptical.

"We have a strong belief that non-for-profit medicine is the proper model, and that the introduction of shareholders takes away the focus from the community."

Nancy Fiedler, senior vice president of the Maryland Hospital Association, is forming a task force to study conversion issues.

While the association has not yet taken a position, she expects it to participate in hearings.

Nomita Ganguly, staff attorney with Boston-based Community Catalyst, a national group which monitors for-profit conversions by hospitals and insurers, said she had had requests for information from several Maryland groups, and was beginning to hear from groups in the District of Columbia and Delaware, the other two jurisdictions in which CareFirst operates.

Ganguly said a review of laws in other states did not indicate that any required a vote of members for a Blue Cross plan to convert. Maryland did mandate such a vote under a 1997 law, but reversed itself with this week's legislative action.

The 1997 law also created the Maryland Health Care Foundation to receive proceeds from any conversion by an insurer or hospital.

Since a nonprofit has benefited from its tax status in building up its assets, a conversion generally triggers a contribution to a foundation or other public purpose.

Under one bill passed by the House of Delegates, but not the Senate, proceeds from a CareFirst conversion would have been set aside to create a new state-run program to provide coverage for uninsured people.

In the end, the legislature decided simply to set aside any money it receives this year.

Marilyn Maultsby, executive director of the Maryland Health Care Foundation, said her group would be conducting a study, including public forums, of how to cover the uninsured, with an eye to making recommendations before next year's General Assembly session.

The study would consider both what could be done with conversion money, and what could be done without it.

Preston said, "A decision on Blue Cross should be made on its own merits," without "a rush to cash out Blue Cross" to provide capital for a fund for the uninsured.

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