Bills aim to block sale of insurer

Top lawmakers work to reverse CareFirst's drift to for-profit rank

`Nonprofit reform' is goal

January 31, 2002|By Michael Dresser | Michael Dresser,SUN STAFF

Buoyed by an outpouring of opposition to the sale of CareFirst BlueCross Blue- Shield, top Maryland lawmakers are proposing legislation that would drag the reluctant nonprofit back to its original role as insurer of last resort.

Five bills were introduced yesterday alone - one aimed at torpedoing CareFirst's conversion to a for-profit company and acquisition by a California insurer, and four intended to reverse five years of drift toward for-profit status.

As hundreds of seniors roamed the legislative halls protesting the $1.3 billion sale to WellPoint Heath Networks, House Speaker Casper R. Taylor Jr. was drafting sweeping legislation that would restructure the CareFirst board.

Taylor's bill would also push CareFirst, which controls more than half the health insurance market in Maryland, to return to its "mission" of providing affordable health care to Marylanders regardless of medical risk.

The speaker confirmed that his so-called "nonprofit reform" legislation is being crafted to send a powerful message to the CareFirst leadership.

"If the state is reforming our insurance plan, that's one way of saying the current operations of the plan isn't satisfactory," Taylor said.

The speaker's remarks reflect years of built-up anger at CareFirst's retreat from less lucrative markets - actions that have boosted the company's reserves while leaving thousands of its constituents without insurance. Some legislative leaders believe CareFirst overplayed its hand with the proposed conversion, giving momentum to efforts to restructure the system.

A CareFirst spokesman said yesterday that the company is losing the public relations war in Maryland.

"We need to do a better job of getting the word out," General Counsel John A. Picciotto said.

But, he said, lawmakers' efforts to "turn back the clock" would hinder the company's ability to compete in an increasingly competitive market.

Picciotto said CareFirst needs to convert to a for-profit company in order to compete with rivals that otherwise would "skim the cream" of the market - the healthiest customers - leaving CareFirst with the obligation of insuring high-risk patients. CareFirst contends that could force it to raise rates for the bulk of its customer base.

Those arguments aren't winning the day in Annapolis so far. To say that legislators loathe the proposed deal is no exaggeration.

"I don't see how the public is benefiting one whit," said Sen. Robert R. Neall, an Anne Arundel County Democrat who added that he has been studying the effects of Blue Cross conversions in other states.

Lawmakers have been getting an earful about the deal from ordinary people as well as lobbyists for powerful health care interests. Hundreds of seniors flooded Annapolis yesterday, meeting with legislators and expressing opposition to the sale.

"CareFirst is a matter of great concern to seniors. The conversion proposal is looked at with some jaundice," said Paul Schuette, who came from Prince George's County with a group from United Seniors of Maryland. He said every legislator with whom he had talked was skeptical about the deal.

Del. Michael E. Busch, chairman of the House Economic Matters Committee, is openly seeking to build pressure for sweeping changes at CareFirst.

"We believe they've been operating in the mode of a for-profit the last five years, and we don't believe it's their mission," the Anne Arundel County Democrat said. "I would encourage every citizen to contact their legislator on how they feel on this issue."

Legislative opposition cuts across party and regional lines, leaving CareFirst with few potential allies except a few powerful but increasingly isolated senators.

As Taylor pointed out, the decision on whether conversion can go ahead is not up to legislators, however. That determination has been left to Insurance Commissioner Steven Larsen, who is to begin hearings on the deal next week.

Lawmakers, though, are moving to influence his decision through several bills.

Legislative leaders say a bill that would shift the burden of proving the deal is in the public interest to CareFirst is a virtual certainty to pass. Busch said his committee would approve the bill today, setting up a House vote next week.

Neall said yesterday that more than 40 of the 47 senators have signed on as co-sponsors of a companion bill he plans to file soon.

Neal also plans to file a bill that would invalidate a provision of the CareFirst-Wellpoint contract under which CareFirst would have to pay the California company a breakup fee if the deal falls through.

Neall, an influential budget subcommittee chairman, proposed a package of four CareFirst-related bills yesterday. They would, among other things, tie the tax breaks it receives as a nonprofit to its participation in markets for low-income and high-risk customers.

"All of these are intended to get CareFirst's behavior back to what it was five years ago," Neall said. "The behavior of this company has changed in recent years."

Busch weighed in yesterday with a bill that attacks one of the deal's central provisions by requiring that any sale be an all-cash transaction. The $1.3 billion deal calls for a payment of $450,000 in cash and $850,000 in stock to be paid into foundations set up by Maryland, Delaware and the District of Columbia - the three jurisdictions in which CareFirst is regulated.

All of these bills could face their toughest obstacle in the Senate Finance Committee, where Chairman Thomas L. Bromwell has been reluctant join House leaders in cracking down on CareFirst.

Bromwell said yesterday that he's keeping an open mind.

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