CareFirst won't fight changes to board

It's likely to let Annapolis name majority of directors

March 25, 2003|By M. William Salganik | M. William Salganik,SUN STAFF

CareFirst BlueCross BlueShield is not fighting General Assembly legislation that would replace a majority of its board and commit the insurer to a nonprofit mission.

"We're on the verge of a love-in here," said Del. John Adams Hurson, chairman of the House Health and Government Operations Committee, which is considering a CareFirst reform bill.

The Senate Finance Committee passed a different version of the bill Saturday evening.

The Senate version calls for the General Assembly and the governor to replace all 12 Maryland representatives on CareFirst's 21-member board by the end of the year and requires that CareFirst remain a nonprofit for at least five years.

Sen. Thomas M. Middleton, the panel's chairman, said last night that CareFirst's representatives did not object to those two major provisions at work sessions over the weekend. The Maryland members of the board are currently selected by the directors.

The CareFirst reform bills were launched this month after Insurance Commissioner Steven B. Larsen rejected the insurer's application to convert to for-profit operation and sell itself.

In his report rejecting the deal, Larsen said CareFirst's board had improperly ignored its nonprofit mission in considering the conversion and sale and in approving executive bonuses tied to the transaction.

"If you do nothing else, I ask you to reform the board of CareFirst," he said at a hearing last week.

Larsen said CareFirst sent him yesterday proposed amendments to the House version of the reform bill, and didn't object to a provision that would turn over all 12 Maryland board seats by Sept. 30 next year. Also, Larsen said, CareFirst "agreed that board members can be removed for not following the nonprofit mission."

Although the version of the bill supported by CareFirst "picked up a lot of what we had suggested," Larsen said he thought it needed some "beefing up" - particularly a provision that would ban officers and directors from receiving excessive compensation.

CareFirst spokesman Jeffery W. Valentine said, "While we don't support changes in board structure or believe they're justified," the insurer had concluded the proposals wouldn't jeopardize the company's licensing from the national Blue Cross and Blue Shield Association or violate rules set by regulators in Delaware and the District of Columbia.

The rules, which stem from when CareFirst affiliated with the Blues plans in those jurisdictions, gave the District six seats on the CareFirst board and Delaware three.

Valentine said CareFirst had not proposed amendments to bills dealing with board turnover because, "I'm not sure we have much control over that."

Hurson said, "The significant news is that the company is basically saying, `We're ready to have a change.' That's a positive development."

His House committee would wait until the Senate passes its bill, hold a hearing on the Senate version, then act, he said. It was likely that the House and Senate bills would differ in some details, with the differences to be resolved by a conference committee, he said.

One key difference between the House and Senate versions is that the House calls for a separate oversight committee to monitor CareFirst. The Senate version doesn't, and CareFirst has called for striking that language from the House bill.

Hurson said he was "open to suggestions" on oversight mechanisms and "there are some ideas from the Senate that would achieve that" without the separate committee.

Middleton said the version approved by his committee calls for eight new CareFirst board members in July - one each selected by the Senate president and speaker of the House, and six chosen by the governor. Those eight would choose replacements for the four other Maryland members by the end of the year.

Hurson said CareFirst had indicated to him that they are "open to a complete change" in the board, but "want some accommodation in regard to time." He said he thought the Senate version, which calls for replacing all the Maryland members by the send of the year, is "a little bit fast."

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