Sale of CareFirst tops list of issues to watch

Then, there's eternal rise of premiums, uninsured

Health care

January 12, 2003|By M. William Salganik | M. William Salganik,SUN STAFF

Always a highly regulated industry, health care in Maryland will see several key administrative and legislative decisions this year - with the proposed sale of CareFirst BlueCross BlueShield topping the list.

While regulators and lawmakers deliberate, however, other changes will be occurring in the marketplace. With health premiums increasing at double-digit rates, there's a scramble among insurers, health providers, employers and workers to control costs - or at least, pass them on to someone else.

"There are some nasty trends," said Paul Ginsburg, president of the Center for Studying Health System Change in Washington, "and I can't remember a time when people seem less sure of the solutions."

Owings Mills-based CareFirst, the state's largest health insurer, wants to be sold to WellPoint Health Networks Inc. of California for $1.3 billion. In the process, the insurer, a nonprofit since it was created in 1937, would convert to for-profit operation.

Insurance Commissioner Steven B. Larsen is expected to rule next month whether the deal is in the public interest. The legislature gets 90 days to review Larsen's decision, and seems disinclined to approve a sale.

Michael E. Busch, the Anne Arundel County Democrat and new House speaker, pointing to $119.7 million in executive bonuses, severance payments and tax benefits that could be triggered by the deal, said the prospective payout is "so overly bold it makes everything suspect."

Whether or not the deal goes ahead, other decisions will follow. If the deal is blocked, some legislators are interested in changing the way the state regulates nonprofit insurers, in an effort to return CareFirst to what they see as its original mission.

If CareFirst is sold, the legislature is to decide what to do with Maryland's share of the money. It would go to a health-related foundation or similar purpose, but decisions would need to be made on whether that means endowing a health foundation offering coverage to some of the uninsured, or some other program, or a mix of programs.

The CareFirst sale money is being dangled at a time the state - already facing a $1.8 billion deficit for this and the next fiscal year - will be considering ways to expand insurance coverage.

A group called Maryland Citizens' Health Initiative is offering a plan that would cover the state's 600,000 uninsured. The plan would be financed through a combination of higher cigarette taxes, charges on employers who don't offer health benefits and a tax on HMO premiums.

Former House Speaker Casper R. Taylor Jr. has developed a more incremental series of reforms, including an expansion of the Medicaid program to cover more low-income adults.

Supporters of both plans concede that they're unlikely to be enacted this year.

Billion-dollar deficit

"We've got better than a billion-dollar budget deficit," Busch said. "I don't think a Medicaid expansion is in the works."

But Robert O.C. Worcester, president of Maryland Business for Responsive Government, a group that helped develop the Taylor plan, said he thinks some kind of insurance reform will begin this year because rising premiums and out-of-pocket charges are "a tsunami hitting the middle class."

Busch said the legislature is likely to act on one part of the Taylor plan, adjusting affordability rules to mean lower premiums - but thinner benefits - for the health policies offered by small businesses.

Also, he said, the legislature will probably act on changes in financing for trauma centers, to avoid a repeat of a months-long shutdown last year of the trauma service at Washington County General Hospital.

One state program enacted last year to help those who have trouble getting health insurance because of their medical histories, a new "high-risk pool," is to begin operation in July.

Another big regulatory decision, likely early in the year, is a revision of the formula by which the Health Services Cost Review Commission sets the rates that hospitals charge in Maryland.

Greater generosity

The hospitals are looking for more generous reimbursement.

"Maryland margins have been, on average, lower than the rest of the nation. Several years of inflation-minus have been baked into our rates," said Warren Green, chief executive officer of LifeBridge Health, which operates Sinai Hospital and Northwest Hospital Center.

"The industry thinks the light is green for the commission to be reasonable."

Any boost in hospital rates, however, will mean a corresponding increase in health premiums in the state.

One survey found health costs for employers in the Baltimore-Washington area increasing 12.6 percent - more for small employers - in 2002.

Another survey projected premium increases of more than 15 percent in the region this year.

"The drug companies are doing well," Ginsburg said. "Hospitals are doing better. Physicians have not done better, but insurers are doing fine. The people in the greatest pain now are the employers, and soon to be the consumers and the government."

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