Jews calls bill a threat to insurer

CareFirst boss says it amounts to a state takeover

Trademarks menaced?

Senate is warned of consequences of measure House OK'd

April 04, 2002|By Michael Dresser | Michael Dresser,SUN STAFF

The chief executive of CareFirst BlueCross Blue- Shield warned yesterday that a sweeping House-passed bill restructuring the insurer and redefining its mission amounts to a state takeover that would threaten the company's right to use the Blues trademarks.

William L. Jews told the Senate Finance Committee that the bill, sponsored by top House leaders, would have a multitude of damaging, unintended consequences.

"This legislation may very well lead to the dismantling of this company," he said.

Jews' appearance went beyond a defense of the insurer's proposed $1.3 billion acquisition by WellPoint Health Networks Inc. - which has attracted vehement opposition among legislators of both parties. The CareFirst executive used his appearance as an opportunity for a vigorous defense of his board, his reputation and his stewardship of the 65-year-old nonprofit company.

"Nothing will cause me to compromise on my commitment to you," he told senators.

In a related development, Insurance Commissioner Steven B. Larsen told senators that a dispute that threatened to derail his consideration of the proposed transaction appears to be close to resolution. Larsen had threatened to pull the plug on the process because CareFirst had failed to meet his deadline for securing an agreement from the District of Columbia insurance commissioner for an HMO merger.

The Maryland official said a response he received yesterday from the District commissioner created a framework for resolving the matter. Larsen said he would move ahead with his study of conversion.

With only five days left to go before the General Assembly session, CareFirst mounted its strongest defense so far in a three-month legislative session that has brought a flurry of bills intended to prevent the company from converting to a for-profit company.

Several of those bills were the subject of hearings in the Finance Committee yesterday, but Jews concentrated his heaviest fire on the bill that would restructure the company's board and restate its mission as a nonprofit.

The legislation is a comprehensive broadside against the board, which House leaders have accused of abandoning its historic mission with no authorization from the Assembly. Among other things, the bill would cut board members' pay and turn over the power to appoint eight members to the governor. House leaders have openly admitted that it amounts to an invitation to Jews to leave.

With Speaker Casper R. Taylor Jr. as the lead sponsor, the measure passed the House unanimously March 24.

By taking his case to the Finance Committee, Jews was fighting on the most favorable ground he could find in Annapolis.

Sen. Thomas L. Bromwell, chairman of the panel, repeatedly expressed reservations about the House bill, saying it looked like an attempt by the legislature to run the company.

"God knows, this General Assembly has a terrible record of getting health insurance to poor people," Bromwell said.

To bolster his case, Jews brought along two members of the much-criticized board - including a nun- as well as an official of the national Blue Cross and Blue Shield Association.

Sister Carol Keehan, president of Provident Hospital in Washington, offered an impassioned defense of Jews, whose impartiality has been questioned because he stands to gain $9 million if the acquisition is completed.

"In the years I've known Bill and his management team, they've always acted with integrity," she said.

Scott P. Serota, president of the national Blue Cross group, said his group owns the rights to the Blues trademarks. He warned that several provisions of the House bill, including the restructuring of the board, could violate CareFirst's charter as a Blue Cross company.

Serota said the association recently revoked the right of an Ohio insurer to use the Blue Cross brand and could do so in Maryland if lawmakers pass the House bill.

Jews ran into criticism from senators over an e-mail barrage from CareFirst employees who had apparently been warned that a disapproval of the acquisition could threaten their jobs.

Sen. George W. Della said he had received hundreds of electronic messages from employees who had been warned that pending bills would put their jobs on the line and take away their 401(k) accounts.

"They're scared to death because someone at BlueCross Blue- Shield is instilling that fear in them," the Baltimore Democrat said.

Jews denied he was that person and said employees were not writing legislators under duress. He said no employees would lose a job if the acquisition is disapproved - at least in the short term.

Sen. John J. Hafer, who said a CareFirst lobbyist had warned him that Western Maryland jobs were at stake, did not seem satisfied. "It comes across as a scare tactic," the Allegany County Republican said.

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