After state report, groups call for resignations at CareFirst

Md. lawmakers seek hearings on insurance commissioner's findings

March 06, 2003|By Julie Bell | Julie Bell,SUN STAFF

Advocacy groups called yesterday for the resignations of CareFirst BlueCross BlueShield's directors and Chief Executive Officer William L. Jews, saying the state insurance commissioner's scathing denial of its proposed sale repudiated their credibility as stewards of a nonprofit organization.

"It's clear that the public interest is not primary or even tertiary with this board," said W. Minor Carter, a lobbyist with the Maryland Cares! coalition opposing CareFirst's proposed acquisition. "We think the board should be replaced and the chief executives."

House and Senate leaders stopped short of calling for immediate resignations, but it was clear by late yesterday afternoon that legislation was in the works that could lead to their ousters.

Even legislators who had strenuously opposed CareFirst's acquisition by for-profit WellPoint Health Networks Inc. of California expressed surprise at how strongly Insurance Commissioner Steven B. Larsen's ruling rejected not only the deal but the behavior of CareFirst's directors and executives.

"It's very damning," said House Majority Leader Kumar P. Barve. "Frankly, I was shocked at the extent to which the public interest was not taken into account by CareFirst in its pursuit of WellPoint."

Senate President Thomas V. Mike Miller also described Larsen's findings as damning, saying it was "almost an indictment of these actions of this particular company ... it cries out for remediation."

CareFirst's board chairman, Daniel Altobello, responded, "We definitely don't think any changes are needed in management or board structure. If we did, we would have made them."

Jews was not available for comment.

Legislative leaders emphasized they had not yet had a chance to read Larsen's voluminous report. But they said its harsh tenor became clear when Larsen briefed them before a news conference.

Legislators and advocates seemed most concerned about Larsen's determination that the CareFirst board had breached its fiduciary obligations. A five-page summary by Larsen said the board had "failed to recognize the nonprofit mission of the company to offer insurance at `minimum cost and expense'" and concluded "management had unilaterally adopted a for-profit orientation." The board, the summary said, "took no action to question the appropriateness of this new direction."

Those findings amounted to a determination that the board had lost sight of the company's mission of assuring access to affordable health care, legislators and advocates said.

"This decision is an unequivocal vote of no confidence in the board and management and we're confident the legislature agrees," said T. Michael Preston, executive director of MedChi, the state medical society.

The Maryland Hospital Association, which also fought the sale, said the General Assembly needed to take action.

"Now what needs to happen is a focus on legislation that refocuses CareFirst on the citizens of Maryland," said Nancy Fiedler, the association's senior vice president.

Yesterday, legislative leaders considered having Larsen present the report Monday to a joint meeting of multiple House and Senate committees.

Some began to craft legislation that would allow law makers more oversight of CareFirst, though any such bill would have to be careful not to violate BlueCross BlueShield rules that prohibit states from controlling any member organization directly.

Barve said he was particularly disturbed about portions of Larsen's report that appeared to show that CareFirst executives had steered the sale of the insurer to WellPoint because they thought it would bring them the biggest personal financial rewards.

"I think it's very clear that management of CareFirst proceeded in a manner that wasn't appropriate in the way they managed bidding between WellPoint and Trigon," Barve said, mentioning a second bidder. "It appears management decided very early on they wanted WellPoint, and the implication is" it was because of big executive bonuses.

But Barve said he had not taken a position on whether CareFirst's directors and executives should resign, saying he wanted to first allow committees to hold hearings.

House Speaker Michael E. Busch also said the report showed that CareFirst's choice of WellPoint "was being driven more for personal profit than what was the best financial deal for the state of Maryland or other jurisdictions."

But Miller said the public process must be allowed to proceed.

A spokesman for Gov. Robert L. Ehrlich Jr. said it was too early for the governor to take a position on any legislation.

"The governor looks forward to reading the commissioner's decision," said Henry Fawell.

Ernest Crofoot, the state AFL-CIO's coordinator for health and senior issues and a director of the umbrella group Seniors United, said he had yet to see the report or the summary. But he called for the directors and executives to resign.

"I would think there should be a clean sweep," he said.

Sen. Thomas M. Middleton, chair of the Senate Finance Committee, said he was surprised by the extent to which CareFirst's directors appeared to have failed to carry out their fiduciary responsibilities. "I think," he said, "you'll overwhelmingly find the legislature agreeing with Commissioner Larsen."

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