CareFirst deal's impact on patients unclear

Consultants say WellPoint denied them some data

January 30, 2003|By M. William Salganik | M. William Salganik,SUN STAFF

In the year since CareFirst BlueCross BlueShield filed its plan to convert to for-profit operation and sell itself, much of the debate has focused on business aspects of the deal, such as executive bonuses and whether the company negotiated a high enough price.

Yesterday, the attention turned to the potential impact on consumers. Predictions, however, were somewhat hazy.

Three consultants to Insurance Commissioner Steven B. Larsen testified yesterday as the final round of hearings on whether the deal is in the public interest continued. All three forecast relatively modest changes for consumers if CareFirst is sold to WellPoint Health Networks Inc., but cautioned that it's impossible to make comparisons on some key points.

Representatives of the Delmarva Foundation for Medical Care, a health quality consulting organization in Easton, and of the Wakely Consulting Group, an actuarial firm based in Clearwater, Fla., said their conclusions were limited in part because WellPoint had declined to provide information on such areas as price structure, expense targets and how it decides who should be denied coverage based on medical history.

Where it was possible to draw conclusions, Delmarva predicted little impact on consumers - CareFirst and WellPoint had similar marks on a variety of "report cards" and other quality measures. However, the Delmarva consultants said, based on WellPoint's practices in California, doctors might experience tougher bargaining over rates.

D. Dale Hyers of Wakely predicted that premiums would increase 3.7 percent because of CareFirst's loss of a discount and a tax break it received as a nonprofit. But those changes, CareFirst has said, would occur whether it converts or not.

Another expert, however, Roger Feldman, a University of Minnesota economist, said a database tracking the finances of hundreds of health maintenance organizations showed that health plans that convert from nonprofit to for-profit, on average, have premiums 4.4 percent lower than they otherwise would have been.

Interviewed after the hearing, Larsen said the missing information from WellPoint "creates a significant disability for us in terms of assuring ourselves there wouldn't be any negative impact from the transaction. The best measure of what WellPoint will do is what it has done in California."

WellPoint operates Blue Cross plans in California, Georgia and Missouri, but the experts said WellPoint hadn't owned the Georgia and Missouri plans long enough to develop a track record.

A WellPoint spokesman, Ken Ferber, said after the hearing that WellPoint considered some of the requested material proprietary information that it wouldn't want its competitors to have, and some irrelevant to how it would perform in Maryland. Policies such as pricing and physician payment schedules can vary significantly from state to state based on local market conditions and regulations, he said.

Also, Ferber said, Larsen will have an opportunity to question WellPoint executives directly as the hearings continue this week and next.

Even in a day focusing on impact on consumers and providers, one financial issue popped up. Hyers, who had been examining data on promptness of payments to doctors and hospitals, said CareFirst had overestimated the amount of reserves it needed to pay unprocessed claims by nearly $60 million in 2000 - which would reduce its reported earnings for the year by that amount.

The earnings figures are important in determining the value of CareFirst - Larsen has to decide whether the $1.37 billion offered by WellPoint is enough - and whether its business results show that it needs to change its corporate form. Hyers said, however, that without more data, he couldn't determine if CareFirst had fixed the problem in the next year or continued to understate its earnings.

David M. Funk, the lawyer representing CareFirst and WellPoint in the process, said CareFirst would give Hyers all the information he said he needs.

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