Insurer held to put profit over patients

Insurance chief says closing of two HMOs will hurt less healthy

CareFirst action assailed

Thousands may fail medical exams, face higher deductibles

October 20, 2001|By M. William Salganik | M. William Salganik,SUN STAFF

CareFirst BlueCross Blue- Shield is trying to improve its profitability "at the expense of thousands of less healthy, former FreeState members" who will have to seek new coverage, the state's insurance commissioner has warned in a letter to legislative leaders.

As CareFirst offers a new HMO and drops two old ones, Commissioner Steven B. Larsen warned in the letter Thursday that an estimated 7,000 FreeState members won't be able to pass the new HMO's medical exams.

Those that can't pass will be offered "open enrollment" policies, but their high deductibles could be viewed as diminished coverage, he said.

Larsen wrote to House Speaker Casper R. Taylor Jr. and Senate President Thomas V. "Mike" Miller that CareFirst's actions are "technically legal" but "inconsistent with the intent" of state and federal health insurance laws.

Taylor said yesterday that Larsen's letter "is a very important heads-up that gives me great pause." He said legislative leaders would try to find a way to deal with CareFirst's actions through legislation.

He also said state leaders would be skeptical of an insurer of last resort such as CareFirst trying to convert from nonprofit to for-profit status, as has been widely expected.

Taylor and Larsen also said CareFirst's actions would compel the legislature to review its rules on "open enrollment" policies, which are offered without medical exams.

John A. Picciotto, executive vice president of CareFirst, said Larsen's letter has raised "significant issues" and that the insurer wanted to work with state officials to address how to deal with people who are uninsured or difficult to insure.

Although some CareFirst members would have to find new coverage, he said, they would find the open-enrollment policies in some cases offered better benefits than the old HMOs.

"We will be working with them individually to see if other Blue Cross products fit what they need," Picciotto said.

The issue stems from CareFirst's announcement in June that two of its HMOs, FreeState and Delmarva, would leave the individual and small-employer markets at the end of the year, leaving 45,600 Marylanders to find new coverage.

Small employers can buy identical coverage - state regulators set a standard-benefit package - at comparable cost.

But that leaves about 22,000 FreeState and Delmarva individual members who are being dropped.

Some will be able to buy policies from CareFirst's new HMO, called Blue Choice, which would combine the money-losing FreeState and Delmarva with the profitable Capital Care.

But, unlike open-enrollment policies, the Blue Choice HMO would require a medical examination. CareFirst estimated that about half the individual members would not pass the exams.

Larsen said this was in part because Blue Choice was using stricter medical standards and in part because some people who joined FreeState when they were healthy have since developed health problems.

"That doesn't mean they all have cancer," Larsen said in an interview. "Maybe they're taking blood pressure medication."

Insurers like to have healthy members, who file fewer claims, making for higher profits. However, Larsen said, generally a health insurer can't cancel coverage once someone is a member.

Picciotto said CareFirst was sending several letters to FreeState and Delmarva members to help them find new coverage.

Two other insurers that offer open-enrollment policies are worried that lots of unhealthy FreeState and Delmarva members would enroll with them.

Insurers pay more in claims on open-enrollment members than they collect in premiums. But the state offsets the cost by allowing the insurers a discount on hospital bills.

As open-enrollment membership increases, "we're concerned that the benefits of participating in the program will be overtaken by the cost," said Walter J. Cherniak, regional media relations manager for Aetna US Healthcare.

Cherniak said Aetna has about 200 open-enrollment members, and saw no surge when it last had an enrollment period in June.

But Mid Atlantic Medical Services Inc. (MAMSI), another insurer, saw its open-enrollment membership triple, from 400 to 1,200, during a July enrollment period, according to Elizabeth Sammis, the company's senior director of government health services.

That was just after CareFirst sent out letters saying it was discontinuing FreeState and Delmarva individual policies.

In his letter to Taylor and Miller, Larsen wrote, "Significant migration to these carriers may result in those carriers losing money in the [open-enrollment] program, possibly precipitating withdrawal" from that market.

Taylor said the state had made "historic progress" in the past five years in making health insurance available to small employers by grouping them into a large risk pool that mixed healthy members with sick, and was moving to put individual policies on a similar footing.

"I don't think we can allow the reform effort we have been involved in for several years to fall, and allow one insurer to cherry-pick," Taylor said.

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