Group criticizes CareFirst on service to D.C. community

Needy's health problems often ignored, study says

October 30, 2003|By M. William Salganik | M. William Salganik,SUN STAFF

CareFirst BlueCross BlueShield could do a much better job of providing community service in the nation's capital, a Washington social-interest watchdog group contends in a report released yesterday that adds to the debate over the future of the region's dominant health insurance provider.

The report by scholars at George Washington and Georgetown Universities for the D.C. Appleseed Center for Law and Justice argued that the nonprofit insurer often fails to address health problems for the needy. CareFirst could use its resources to subsidize policies for low-income people, participate in Medicare and Medicaid health maintenance organizations and provide grants or subsidies to safety-net clinics, the group said.

Jeffery W. Valentine, a CareFirst spokesman, said the report appeared to be "more of an advocacy document than a thorough economic analysis of the health care marketplace."

CareFirst, he said, is obligated to act in the interests of its subscribers, as a charitable nonprofit and as an insurer with sufficient financial reserves and "strike the right balance between those sometimes-contradictory goals is a difficult challenge."

Maryland, which this year blocked a CareFirst plan to convert to for-profit operation and sell the company, has taken steps to get CareFirst to follow a nonprofit mission. It hasn't spelled out charitable activities that would be required.

In the District of Columbia and Delaware, the other jurisdictions where CareFirst operates, insurance commissioners have expressed concerns about whether a change in mission could raise prices for subscribers or threaten the financial stability of the company.

The D.C. and Delaware insurance commissioners have directed CareFirst not to make changes without their approval and will hold hearings next month on the issue.

"Competitors don't have to do these things," such as subsidizing policies for those who can't afford coverage, "and the profit margin is fairly small," Dana Sheppard, director of policy and public affairs for the D.C. Department of Insurance and Securities Regulation, said yesterday. "If CareFirst is required to do more, at what cost?"

Walter Smith, executive director of the Appleseed Center, said CareFirst could spend money on public service projects without necessarily raising prices for commercial members. Rather, he said, as a nonprofit, CareFirst could use some of its earnings, beyond what it needs to retain for capital improvements and other purposes, to meet community needs. "We don't want to require it to do things it can't do," Smith said.

He said Appleseed had commissioned a follow-up study, expected to take about six months, that could provide more details about the cost of public interest projects and about the resources CareFirst could draw on to finance them.

Although it doesn't contain cost information, yesterday's report notes that other nonprofit Blue Cross and Blue Shield plans, including Highmark in Pennsylvania and Excellus in New York state, offer subsidized coverage to low-income and moderate-income members.

The report also said that many insurers, nonprofit and for-profit, offer a greater range of Medicare insurance products - CareFirst does not offer any that include prescription coverage - and participate in state Medicaid programs.

CareFirst once participated in the Medicare and Medicaid HMO programs in Maryland - covering about 150,000 poor and elderly - but dropped both in 1999 and 2000. CareFirst lost more than $40 million in three years in the programs, company spokesman Valentine said.

The Appleseed report said CareFirst had contributed $59,500 in grants to D.C.-based health groups in 2000, $233,000 in 2001 and $61,000 last year through August.

"These sums do not compare favorably," the report concluded, to the company's total surplus of about $800 million last year; to its quarterly surplus of $40.8 million in the second quarter of this year, 66 percent more than in last year's quarter; or the $2.8 million compensation of its chief executive officer last year.

A consultant to Maryland regulators reported during the review of CareFirst's proposed sale that the insurer had received $50.4 million in tax breaks and other benefits from the state in 2001 and had returned $13 million in benefits to the public. The state has since taken the tax benefits to apply to a prescription program for the elderly and a pool for people who can't get insurance because of chronic health problems.

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