Most at hearing in D.C. oppose CareFirst sale, for-profit status

Regulator asks insurer for details on deal's impact

May 23, 2002|By M. William Salganik | M. William Salganik,SUN STAFF

WASHINGTON - The review of CareFirst BlueCross BlueShield's plan to convert to for-profit operation entered another phase yesterday, as the District of Columbia's insurance commissioner conducted an initial public comment session and sought additional information from CareFirst.

CareFirst, based in Owings Mills, is seeking approval to convert and be acquired by WellPoint Health Networks Inc., a California insurer that operates Blue Cross plans in three states.

Maryland's insurance commissioner already has held five days of formal hearings and several sessions for the public to express opinions. Delaware, the third jurisdiction where CareFirst operates, doesn't plan to hold hearings until late this year or early next year.

Lawrence H. Mirel, commissioner of insurance and securities regulation in D.C., heard from about a dozen people last night, most expressing opposition or strong qualms about CareFirst's conversion and sale.

Last night's comment session began with David D. Wolf, an executive vice president of CareFirst, spelling out his view of the advantages of the transaction. Unlike some previous statements by CareFirst, which dealt with business needs for the insurer such as better access to capital, Wolf stressed the possibility of slowing the increase in insurance costs through efficiencies.

He also pointed out the $1.3 billion sale price to be paid to foundations, which, he said, created "great potential to do good."

Most speakers, however, said they were worried that the switch to for-profit operation would increase premiums and reduce benefits.

George Barker, speaking for the Health Systems Agency of Northern Virginia, a health planning agency, said that after Virginia's Blue Cross plan converted to for-profit status, it began to take a "hardball approach" to hospitals and doctors.

Sharon A. Baskerville, executive director of the D.C. Primary Care Association, a group that represents clinics and advocacy groups, said, "It is troubling that the only groups supporting the merger are the two parties to the deal, CareFirst and WellPoint. Physicians, medical societies, hospitals and health care advocates all oppose."

Mirel also issued a letter yesterday to David M. Funk, a regulatory lawyer for CareFirst and WellPoint, calling for more details in support of their application. For example, he said that to show the impact of the deal on availability and affordability of health insurance, CareFirst and WellPoint should provide a "detailed analysis" of products and premiums before and after conversion and of the likely impact on coverage for "small groups, uninsurables and the poor."

Dana Sheppard, senior counsel to Mirel, said such requests were routine when reviewing large and complex acquisitions.

CareFirst and WellPoint are to provide preliminary answers by July, and Mirel expects to hold formal hearings in the fall.

In Delaware, Attorney General Jane Brady asked a hearing officer yesterday to grant her legal status in the proposed acquisition of CareFirst BlueCross BlueShield by WellPoint Health Networks.

In seeking to become a party to the proposed merger, Brady would join Insurance Commissioner Donna Lee Williams in the formal regulatory review of the merger application.

Retired Superior Court Judge Vincent Bifferato, appointed by Williams as the state's independent hearing officer, will consider Brady's motion at a June 6 hearing.

The Associated Press contributed to this article.

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