Jews makes pitch to state

CareFirst CEO tells legislators sale to WellPoint is needed

February 06, 2002|By Michael Dresser | Michael Dresser,SUN STAFF

William L. Jews may have the hardest sales job in Maryland - and he knows it.

The chief executive officer of CareFirst BlueCross Blue- Shield paid one of what will soon be many visits to Annapolis yesterday in a persistent effort to persuade legislators, the media and the public of the merits of the nonprofit insurer's $1.3 billion sale to a California company.

"I think people just don't understand the facts, the issues yet," he said.

Jews was visiting the state capital as part of a CareFirst public relations counteroffensive against a brigade of health care advocates, lobbyists, lawmakers and others who want the Maryland General Assembly to throw a monkey wrench into the company's planned conversion to a for-profit company.

The decision to approve or reject the deal is up to the state insurance commissioner, but skeptical lawmakers - prodded by concerned constituents - have been proposing bill after bill to either complicate the deal or otherwise bring CareFirst to heel.

CareFirst's critics have dominated the debate in the early stages of the legislative session that ends in April. With few allies, the company is depending on its CEO - who previously had declined requests from The Sun to discuss the deal - to get across the company's message.

Jews started his day with an 8 a.m. visit to the Republican caucus in the House of Delegates, followed by an interview with reporters. The afternoon would bring a series of private meetings with lawmakers - all part of an effort to counter what Jews calls the "speculation, rumor and innuendo" surrounding the proposed sale to WellPoint Health Networks.

"I'm going to seize every opportunity to educate people on why the transaction is beneficial," he said.

The Republican caucus would normally be friendly territory for a leading businessman, but GOP lawmakers - many from rural areas that CareFirst pulled out of - have been just as cool to conversion as Democrats.

Jews recounted the company's recent history, from its near-collapse in the early 1990s to its mergers with the District of Columbia and Delaware Blue Cross plans and its emergence as the seventh-largest Blues plan in the nation - a $6 billion company with reserves of $600 million.

In today's market, that's not big enough, Jews said. As part of a larger company, CareFirst would have access to capital, leverage in the marketplace and economies of scale, he told the Republicans.

Furthermore, he said, the reserve numbers can be deceiving. Maryland, he said, is "the weakest link" in the three-state network - contributing the least to its reserves because of its long list of mandated benefits. If the deal is rejected, he said, "in three years I'll be sitting in front of you saying our company is impaired."

The argument, bolstered by charts, appeared to make some headway with GOP lawmakers. "You made a pretty compelling case that Maryland is a dog," said Del. Richard La Vay of Montgomery County.

The CEO dismissed the frequently heard concern that medical decisions would now be made three times zones away.

"Every one of those decisions will be made locally," he said, adding that he fully expects to stay on and make them. Furthermore, he said, jobs will be preserved throughout the region.

Jews also discounted arguments that WellPoint could come in and try to overturn Maryland's system of health cost regulation - which brings it a $400 million federal waiver - or stop writing policies for individuals on an open-enrollment basis. Neither change would make economic sense for WellPoint, he said.

The 50-year-old CEO, a towering figure with the build of a linebacker, is an imposing and authoritative presence as he makes his company's case.

Some leading legislators, however, say they're not buying arguments they've heard many times.

Del. Michael E. Busch, chairman of the House Economic Matters Committee, said Jews' assurances about WellPoint's future policies are worthless. "He's not going to have the ultimate say if it's post-conversion," the Annapolis Democrat said. "It's the same as any merger. The final say is not going to be made by Bill Jews."

Busch, an outspoken foe of conversion, called the WellPoint deal "basically a shell game."

Jews won't characterize his critics as opponents of the deal. He calls them "speculators." He added that it is impossible to give lawmakers the kind of ironclad guarantees they are demanding.

"To speculate on what the marketplace is going to look like in three to five years would suggest we all have a crystal ball," he said.

While some conversion opponents have expressed concern that CareFirst executives might have been swayed by generous compensation packages, Jews said he does not have a contract with WellPoint. He added that while he expects to be kept as the top executive in the region, his compensation has yet to be determined.

Responding to another objection, Jews said WellPoint was willing to pay the entire purchase price in cash if the state required it - a statement a spokesman later called a misunderstanding. CareFirst media relations manager James P. Day said that while the deal remains as announced - a purchase for $450 million in cash and $850 million in stock - the state foundation set up to receive the money would be free to sell the stock upon the close of the deal.

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