CareFirst proposal draws cool response

First public hearing elicits skepticism on sale of health insurer

February 05, 2002|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Maryland citizens and leaders of several civic and advocacy groups expressed concern last night over the proposed conversion of nonprofit CareFirst Inc., the state's largest health insurer, to for-profit status and eventual sale to a larger, out-of-state company.

Critics said they worry about escalating premiums, the possibility of dwindling health coverage, the fate of seniors in rural areas and the presumed loss of control of in-state health care decisions to an out-of-state, for-profit company.

Maryland Insurance Com- missioner Steven B. Larsen said the hearing yesterday at Harford Community College was an opportunity for him to get "input from the citizens of Maryland ... regarding this acquisition and conversion."

Yesterday's hearing was the public's first opportunity to debate the CareFirst proposal.

The health insurer announced in November that it plans to convert from nonprofit status to profit-making and sell itself to WellPoint Health Networks Inc. for $1.3 billion.

WellPoint, with $9.2 billion in revenue in 2000, has 12.8 million members, and was the first Blues plan to convert to for-profit status, in the mid-1990s.

CareFirst's vice president and general counsel, John Picciotto, told the audience of about 200 last night that the merger with WellPoint will give CareFirst greater access to capital and that headquarters for each of CareFirst's plans in Maryland, Delaware and Washington will not change.

He also said that jobs in the region will be preserved, and local control will be maintained in health care decisions.

He said that premiums "will go up, regardless of whether we convert" to for-profit status, but said the increase won't be as large if CareFirst is allowed to convert.

Skeptics of the conversion-and-takeover plan asked last night why CareFirst needs to merge with a larger company in the first place.

"Bigger is not necessarily better," said Calvin M. Pierson, president of the Association of Maryland Hospitals and Health Systems. CareFirst's conversion and sale are not necessary to protect CareFirst's assets or market position in the region, he said.

The Maryland Citizens' Health Initiative (MCHI) presented a study that compared CareFirst and WellPoint. It found that while rates rose faster at WellPoint, the amount spent on health care is greater at CareFirst. It also found that CareFirst already spends more on technology than WellPoint.

Earlier, CareFirst's Picciotto said that WellPoint pays "within a tenth of a percent, the same health care dollar."

Vincent DeMarco, MCHI's executive director, said the organization has yet to take a stand on the CareFirst proposal, although his group was "very skeptical" of the proposed transaction.

Shirley Klein, vice president of Klein's Supermarkets in Harford County, was worried that higher rates at a for-profit CareFirst would mean costlier health insurance for her 600 employees.

"We are concerned that we would have to pass along higher costs to our customers through higher food prices," she said.

Proceeds from CareFirst's sale to WellPoint are supposed to go toward public and charitable purposes.

CareFirst's proposed conversion-and-takeover by WellPoint has set off a review process that will last about 12 months, Larsen said yesterday.

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