Little impact predicted from CareFirst sale

5 independent consultants produce reports for state

Done to aid Larsen's decision

WellPoint deal considered from public-interest view

January 22, 2003|By M. William Salganik | M. William Salganik,SUN STAFF

The sale of CareFirst BlueCross BlueShield is unlikely to produce major positive or negative impacts on consumers or the state generally, according to five independent consultants' reports released yesterday.

The sheaf of reports was ordered by Insurance Commissioner Steven B. Larsen, who is to rule next month on whether the deal is in the public interest. CareFirst wants to convert to for-profit operation and be sold to WellPoint Health Networks Inc. for $1.37 billion.

WellPoint and CareFirst have similar track records on quality and service, one report said. Two other reports offered opposite conclusions on whether the deal would increase prices.

Yet another consultant said a foundation backed by the sale money could be useful, but its contribution would be small relative to the total health costs and needs in the state.

Finally, a consultant said CareFirst's board acted properly in making the decision to sell, but in choosing WellPoint improperly considered factors other than price, including headquarters location and jobs for current CareFirst executives.

CareFirst filed rebuttals to several reports, challenging specific figures and projections more than overall conclusions.

Here's a look at the reports:

Impact on consumers and health care providers - The Delmarva Foundation, a health quality consulting organization in Easton, concluded that "changes in quality of care and services are likely to be minimal, if the conversion proceeds."

Delmarva compared CareFirst's and WellPoint's policies in such areas as approving care, and reviewed state report cards and other indexes of health plan performance. It generally found the WellPoint and CareFirst plans earning similar marks.

"The results of this review indicate few differences between WellPoint Health Networks Inc. as a `for-profit' health care company and CareFirst Inc., a `not-for-profit' company," Delmarva wrote. "The immediate impact of the proposed conversion on Maryland stakeholders would be neutral to moderately negative."

The "brunt of the negative changes," the report said, would likely be felt by doctors and hospitals, given WellPoint's track record in California of hard-nosed bargaining over rates.

In a rebuttal filed by CareFirst, Joseph Marabito, a partner in the consulting firm Accenture, argued: "If lower physician reimbursement translates to lower premiums, then health insurance would cost less than it otherwise would have - a positive impact on consumers."

The Delmarva report noted that WellPoint offers a number of lower-premium plans with higher out-of-pocket costs for patients getting care.

"If co-pays and deductibles prevent accessing needed care, the insurance that patients are paying for is essentially illusory," Delmarva said. " ... Such low cost coverage will not only cause the currently uninsured to buy these `lite' policies but will often siphon off the better-risk individuals from purchasing more comprehensive insurance."

Impact on prices and availability of policies - The Blue Cross plan in Georgia showed no change in pricing trends after WellPoint bought it, said Wakely Consulting Group, an actuarial firm based in Clearwater, Fla.

Wakely said the loss of CareFirst's tax exemption on premiumsand of a discount it received for being an "insurer of last resort" were likely to add 3.7 percent to premiums for individuals and small employers. Large employers would feel little effect, Wakely said. The price increase would likely cause some individuals or employers to drop coverage, it concluded.

Noting that CareFirst gave up the discount and the tax break in last year's legislative session, G. Mark Chaney, chief financial officer, said in a rebuttal statement, "the premium tax exemption will no longer benefit CareFirst regardless of a change in corporate structure."

Another study, by Roger Feldman, Douglas Wholey and Robert Town, faculty members in health policy at the University of Minnesota, drew from a database tracking hundreds of HMOs for the past 15 years.

That study concluded that for-profit HMOs charge lower premiums, by about 4.4 percent on average. "HMOs reduce their premiums immediately by a small but statistically significant amount when they convert to for-profit ownership," it said, "and from that point onward, they resemble HMOs that have always been for-profit."

Potential for a health foundation - If CareFirst is sold, the money paid would go to health foundations or similar purposes in Maryland and other jurisdictions where CareFirst operates.

In other states where such foundations operate, said consulting group LECG LLC, they "have clearly provided new revenue streams for community-based health care interventions."

The foundation would conduct more charitable activity than CareFirst does as a nonprofit. CareFirst's charitable activity, LECG found, ranged between $157,000 and $2.3 million a year - well below the $50 million in annual tax breaks and discounts it has received.

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