CareFirst elects not to raise rates

`Open enrollment' decision anticipates a revised program

Hefty boost was possible

7,000 current clients and new members are affected

January 04, 2002|By M. William Salganik | M. William Salganik,SUN STAFF

CareFirst BlueCross Blue-Shield said yesterday that it will not raise premiums on its "open enrollment" policies, despite a recent court ruling that makes a hefty rate increase possible.

John A. Picciotto, CareFirst's executive vice president and general counsel, said the insurer will not increase rates on an estimated 7,000 current subscribers, or on new members during the next enrollment period in May, because it expected legislators to change or replace the open enrollment program.

The ruling permitting the rate increases is the latest - and probably not the final - step in a long-running dispute between CareFirst and Maryland Insurance Commissioner Steven B. Larsen.

In March, CareFirst filed for a 50 percent increase in premiums for its open enrollment policies, which are offered without medical exams and intended to provide an alternative for people who have difficulty getting insurance because of health problems. The open enrollment program is also known as the SAAC program, since it is supposed to offer "substantial, available and affordable coverage" to the difficult-to-insure.

CareFirst said in its rate filing that claims on the open enrollment policies had exceeded premiums by about $2 million in the previous year. Larsen, however, denied the increase, saying that CareFirst received more then $30 million in hospital discounts because it participated in the SAAC program - an incentive offered by state regulators to help reduce the number of uninsured.

CareFirst appealed, arguing that Larsen's authority extended only to reviewing premiums compared to claims - not to whether CareFirst should use its hospital discount to keep down the price of open enrollment policies.

Judge John Carroll Byrnes, in Baltimore City Circuit Court, sided with CareFirst in a Dec. 21 ruling. He said the Maryland Insurance Administration (MIA) could use "statistical analysis and reasonable actuarial assumptions" to see if SAAC polices "would cost too much in light of the coverage it would buy." However, the judge wrote, "the discount benefit ... is simply not within the statutory authority of MIA."

Larsen said yesterday that he will likely appeal the decision.

The SAAC program has been subject to controversy for years. Critics have said the policies are not attractive to enough of the uninsured and that the hospital discount is too high. Recently, the other two insurers participating, Aetna U.S. Healthcare and Mid Atlantic Medical Services Inc. (MAMSI), decided to drop out of the program, although MAMSI will continue to cover the 1,200 members it already has.

Larsen said yesterday that the Byrnes decision "has created an even greater sense of urgency for revising the SAAC program." Although CareFirst has argued that the Health Services Cost Review Commission could review affordability, Larsen said the legislature has blocked that commission from changing the program, so "now, essentially, there's no recourse other than a legislative fix."

The SAAC issue, Larsen said, was becoming entangled with review of CareFirst's plan to convert to for-profit status and be acquired by California-based WellPoint Health Networks Inc. for $1.3 billion. The review of the conversion could take a year or more, Larsen said, and "SAAC can and should be dealt with irrespective of a conversion application."

Picciotto said CareFirst also supports legislative action to fix the program. He said CareFirst would offer its own reform plan in the next few weeks.

David M. Funk, the lawyer who represented CareFirst in the appeal, said the decision would not apply to other large health insurers, since CareFirst receives different regulatory treatment as a "nonprofit health services plan." However, Funk said, the decision could prevent Larsen from considering affordability in future CareFirst rate filings for non-SAAC policies.

Larsen said he disagreed with Funk's interpretation.

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