D.C. asks Ehrlich to veto bill on CareFirst

District regulator fears it will `politicize' insurer

April 16, 2003|By M. William Salganik | M. William Salganik,SUN STAFF

The District of Columbia insurance commissioner asked Gov. Robert L. Ehrlich Jr. yesterday to veto legislation - passed unanimously last week by both houses of the Maryland legislature - to force CareFirst BlueCross BlueShield to adhere to a nonprofit mission.

Lawrence H. Mirel wrote to Ehrlich that the bill is "a clear attempt to politicize the operation of a private, nonprofit corporation whose current members were chosen in accordance with the corporation's bylaws and who have legal terms of office." The bill calls for a nominating committee chosen by the governor and legislative leaders to choose replacements for 10 of CareFirst's 21 board members.

Shareese N. DeLeaver, an Ehrlich spokeswoman, said the CareFirst legislation was one of many under review.

"All opinions are welcome," she said of the bill. "We have no position at this time."

The bill to reform CareFirst was passed after Maryland Insurance Commissioner Steven B. Larsen blocked CareFirst's application to convert to for-profit operation and sell the company. Larsen called on legislators to replace CareFirst's board members, who he said had failed in their duty to the insurer's nonprofit charter.

Mirel's call for a veto was the second objection to the bill to surface since its passage.

On Friday, the national Blue Cross and Blue Shield Association said the Maryland bill might violate association rules that bar a Blue Cross plan from being controlled by an outside entity. If the association concludes there is a violation, it could block CareFirst from using the valuable cross-and-shield trademark.

Both Mirel and the association had written to legislators before the bill's passage, and the D.C. insurance regulator met with legislative leaders.

But the chairmen of the committees that handled the CareFirst bills, Thomas M. Middleton of the Senate Finance Committee and John Adams Hurson of the House Health and Government Operations Committee, said they had amended them to deal with the concerns that had been expressed.

Supporters of CareFirst reform yesterday, in turn, criticized the critics. "They should try to take the blemishes away from CareFirst, rather than being enablers for CareFirst to continue their current practices," said W. Minor Carter, a lobbyist for Maryland Cares!

"It's a continuation of the kind of tactics we've seen throughout," said Nancy Fiedler, executive vice president of the Maryland Hospital Association, a strong backer of the reform effort. She said CareFirst was working "behind the scenes, after the fact, rather than coming to the table and being part of the process."

Jeffery W. Valentine, a CareFirst spokesman, said the insurer was not working behind the scenes to kill the bill. He said of Mirel and the association, "It's really their call on how they interpret it."

Dana Sheppard, Mirel's director of policy and public affairs, said he hadn't spoken to anyone from CareFirst, and wasn't sure if Mirel had. But he said the insurance commissioner's office had been studying the Maryland legislation for the past week and had developed qualms about it.

Mirel wrote to Ehrlich that if the health insurer were denied use of the Blue Cross trademark, "the loss of that brand would have a devastating effect" on CareFirst's operation.

Also, Sheppard said, Maryland's emphasis on nonprofit mission could force CareFirst to maintain unprofitable business in the state, and the insurer "may look to Delaware and D.C. to subsidize" Maryland losses. That, in turn, would hurt subscribers in the District and Delaware, where CareFirst also operates Blue Cross plans.

Sheppard said Mirel had not reached a conclusion on whether CareFirst should convert to for-profit operation, since Larsen issued his decision before Mirel could hold hearings.

But, he said, "Larsen's order [blocking the conversion] should be sufficient." In Mirel's view it was not necessary for lawmakers to rush to pass a bill, Sheppard said.

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