Most speakers want CareFirst to remain nonprofit, and local

One says insurer's flaws are `in its leadership'

February 06, 2003|By M. William Salganik | M. William Salganik,SUN STAFF

From an Anne Arundel County mother holding up a vial of her son's hemophilia medication to the heads of the state's hospital association and medical society, speakers yesterday called for the state's Blue Cross plan to remain local and nonprofit.

The public comment period concluded seven days of hearings over the past two weeks by Insurance Commissioner Steven B. Larsen. He is to announce his decision Feb. 20 on CareFirst BlueCross BlueShield's plan to convert to for-profit operation and be sold to California-based WellPoint Health Networks Inc. for $1.37 billion.

About 40 people attended the comment session at a Baltimore hotel, with more than a dozen speaking and the sentiment running heavily against the CareFirst deal.

The sale had been negotiated with "the powerful bias of self-interest," said T. Michael Preston, executive director of MedChi, the state medical society. "Sure, the deal has been modified at the last minute to mitigate the rank corruption of the tens of millions of dollars in pay packages for CareFirst's senior management. Should we now forget about that scandal?"

CareFirst executives stood to collect more than $100 million in deal bonuses, severance and tax benefits if the sale was completed, including $39.4 million for Chief Executive Officer William L. Jews. After a consultant to Larsen said the bonuses were illegal, WellPoint and CareFirst renegotiated executive compensation.

Preston continued, "CareFirst's weakness is not in its market position or its ability to raise capital; its weakness is in its leadership."

Calvin M. Pierson, president of the Maryland Hospital Association, said reports by a consultant hired by Larsen showed that of 12 areas of potential impact on Maryland subscribers and health care providers, five were rated negative, six neutral and one inconclusive. "None of the impact areas were positive as it relates to WellPoint," he said.

Although the purchase price would be paid to health-related foundations, Pierson and Preston said the likely income from Maryland's share, perhaps $40 million a year, would be outweighed by what the state could lose. Pierson said WellPoint would threaten the state's hospital rate-setting system, which brings an additional $400 million a year in Medicaid payments. Preston said WellPoint currently pays out less of its premium dollar for care than CareFirst does, and that Maryland would lose another $300 million in payments if the WellPoint payout ratio were imposed here.

Among those joining the institutional critics was Christina Wick, of Lothian in Anne Arundel County, a CareFirst subscriber. She said her 7-year-old son, who has hemophilia, gets medication costing $1,215 every other day, and she fears that a for-profit plan would limit coverage for such expensive patients.

"The state of Maryland needs one health insurance entity that is nonprofit and accountable to the commissioner, the state legislature and the citizens of Maryland," she said. "This is not a game. There cannot be winners and losers."

Sandra Sales, a retired Baltimore teacher, said, "I'm happy to pay my fair share for medical help for everyone. However, I'm not happy to pay for people to get rich over the health needs, the life-and-death issues, of the people who pay the bills."

Raymond V. Haysbert Sr., retired president and chairman of Parks Sausage Co., spoke in favor of the CareFirst deal. He said it is important to keep CareFirst strong, since it has more than 6,000 employees and contributes to the local economy, and that a conversion would be "entirely in keeping" with current business trends.

Moreover, he said, given the state's budget crisis, the state could get an endowment of as much as $1 billion to use for a health foundation.

After Larsen's decision, the Maryland legislature will have 90 days to review it. Regulators in the District of Columbia and Delaware, where CareFirst also operates, are expected to hold their own hearings this spring or summer, unless the deal is killed in Maryland.

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