CareFirst's return to mission of health care for all is sought

`Maryland is creating the model' for others, consumer advocate says

CareFirst's return to original mission sought

March 06, 2003|By Andrew Ratner | Andrew Ratner,SUN STAFF

How to return CareFirst BlueCross BlueShield to its original mission of ensuring quality health care for all?

With Maryland Insurance Commissioner Steven B. Larsen's resounding rejection yesterday of the proposed conversion and sale of CareFirst BlueCross BlueShield, lawmakers, consumer advocates and industry analysts have opinions on how the company might reclaim its nonprofit objective - or be prodded to do so.

Among the ideas floated:

Require excess profit to be reinvested in insurance service programs.

Restore financial incentives for CareFirst to serve the "toughest to insure."

Appoint some board members who represent consumer or subscriber interests.

Replace the company's current management.

Increase oversight by state officials.

Maryland may help create a road map for other states and nonprofit insurers at similar crossroads, some observers say.

About a dozen states have allowed conversions of nonprofit Blue Cross plans to for-profit status. A rejection of a proposed conversion in Kansas a year ago has rattled around on court appeals since.

"There are no models; Maryland is creating the model," said Dawn Touzin, director of Community Health Assets Project, a Boston-based organization that works with local and state consumer groups on health care matters.

"CareFirst is bruised, with a board and management that have had its goals rejected," said Touzin, who testified before a legislative committee on the subject last month in Annapolis. "But you should not have a knee-jerk reaction that becomes punitive. If you impose all sorts of requirements on CareFirst, it might not accomplish what you want."

CareFirst had begun behaving more like a for-profit company in recent years. It shed high-cost coverage for the poor and elderly and fattened its cash reserves to make itself a more attractive candidate for a buyout, ultimately receiving a $1.37 billion offer from WellPoint Health Networks Inc. of Thousand Oaks, Calif.

Del. John Adams Hurson, the Montgomery County Democrat who chairs the House Health and Government Operations Committee, said that the General Assembly will have to be more vigilant in insuring that the insurer serves the public interest.

"We're not in a posture where we can wipe out the board, but we clearly have to get new blood on the board of directors and have it report periodically to the legislature and governor," Hurson said yesterday.

"We have to have some oversight over this company and smart people getting reviews on a consistent basis from them. The company may be very supportive of it. They realize they've entered a new chapter in their existence."

Legislative options floated yesterday included having the governor appoint a couple of independent directors, or forming a commission that would make such appointments. Another option might be to have the nonprofit meet additional annual reporting requirements to give legislators a clearer picture of whether it is sticking to its mission of assuring affordable health care.

Oversight of CareFirst is complicated by the fact that its coverage area spans Maryland, Delaware and Washington.

Del. Shane E. Pendergrass, a Howard County Democrat and a vocal opponent of CareFirst's conversion to for-profit status, said that House Speaker Michael E. Busch and others had been working on a bill on which she expected to be the lead sponsor. She said its purpose would be "to make sure they keep in mind the public interest."

Ernest Crofoot, the state AFL-CIO's coordinator for health and senior issues and a director of the umbrella group Seniors United, said one way to assure that CareFirst directors would do so is to seek directors who would work without pay.

"In 24 hours, I could bring in a board of competent, intelligent, interested people who have the interest of the people at heart and who would work for nothing," Crofoot said. "At the root of this problem is board members who get paid an incredible amount of money to do nothing."

Sam Jordan, director of Health Care Now!, a consumer advocate group in Washington, said the state needs to require CareFirst to reinvest its income to provide coverage. The company built a reserve of nearly $800 million, roughly triple what its statute requires, to make itself more attractive to a for-profit suitor while dropping Medicare and Medicaid programs that covered tens of thousands of senior citizens and poor families.

The state needs to restore tax exemptions and other incentives that enable a nonprofit insurer to serve portions of the marketplace that for-profit companies have abandoned, Jordan said.

Although Larsen's unequivocal ruling drew wide praise, many said attorneys general and lawmakers need to be more involved because the position of insurance commissioner was created to ensure the solvency of health plans, not to police nonprofits.

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