Delaware Blues offer plan on destiny

They'd keep CareFirst tie, with right to separate

November 05, 2003|By M. William Salganik | M. William Salganik,SUN STAFF

DOVER, Del. - Blue Cross and Blue Shield of Delaware presented its state insurance commissioner yesterday a plan under which it would remain affiliated with CareFirst BlueCross BlueShield but would be able to divorce itself from the regional health insurer if it was unhappy with the results of Maryland's efforts to reform CareFirst.

The reshaped relationship between the Delaware Blues and CareFirst gives the Delaware plan "control of our destiny in case things did not work out, while continuing to have the benefits of our successful affiliation," Max S. Bell Jr., board chairman of Blue Cross and Blue Shield of Delaware (BCBSD), said yesterday at a public hearing on the proposal.

During one of the few unscripted moments at yesterday's hearing, Bell said BCBSD's relationship with CareFirst, which began in 2000, was "working extremely well until the Maryland legislature screwed it up."

After Maryland regulators blocked a CareFirst plan to convert to for-profit operation and sell the company, lawmakers passed a law in the spring locking in CareFirst's nonprofit mission and directing that the 12 Maryland members of the 21-member CareFirst board be replaced.

Regulators in the District of Columbia, who also oversee a CareFirst affiliate, have expressed reservations similar to Delaware's about Maryland's assertiveness. Lawrence Mirel, the D.C. insurance commissioner, said last night that he believes the D.C. Blue Cross plan is trying to work out an arrangement with CareFirst along the lines of Delaware's, "and that's what I'd like to see."

Delaware Insurance Commissioner Donna Lee Williams won't rule on the plan, which has been approved by the CareFirst and BCBSD boards, for at least two weeks. But a member of her staff, Darryl Reese, director of examinations, recommended approval at yesterday's hearing, where he testified that the proposed arrangement "avoids the troublesome aspects of the Maryland legislation that could have an adverse impact on BCBSD and Delaware consumers."

The changes would be subject to review in Maryland, too. Maryland Insurance Commissioner Alfred W. Redmer Jr. said last night that because he had not seen the proposal, he couldn't comment, but "I look forward to continuing to work with Commissioner Williams on whatever questions or concerns she has."

If approved, officials of CareFirst and BCBSD testified, the changes would have no impact on consumers or employees in either state. The only change would come if BCBSD decided to leave CareFirst.

CareFirst, a holding company with headquarters in Owings Mills, was created in 1998 to coordinate activities of the Maryland and D.C. Blues plans. Delaware joined two years later. The Delaware and D.C. plans retained their boards of directors, which approved local decisions such as pricing and product offerings, and selected members to serve on the parent CareFirst board.

Under the Maryland legislation, CareFirst and BCBSD officials said yesterday, the parent board would have taken control over local decisions such as pricing.

Changing the nature of the affiliation keeps control in Delaware for Delaware decisions, they said.Mirel said he had similar concerns over authority for decisions by the D.C. plan.

Under the plan described yesterday, BCBSD would also regain rights over the cross-and-shield trademark in Delaware. CareFirst now has control over the trademark throughout the region.

William L. Jews, chief executive officer of CareFirst, would remain CEO of BCBSD under the arrangement, but his tenure in that post would be determined by the Delaware board.

BCBSD could leave CareFirst altogether under a number of conditions, ranging from insolvency of CareFirst to a decision by the BCBSD board to form a different affiliation.

Bell testified that the Delaware board members had developed a working relationship in which they trusted the other CareFirst board members but weren't sure how the new board members, chosen under the Maryland reform law, would perform.

The first five new board members, chosen by a nominating committee appointed by Maryland officials, are to take their seats by the end of the year.

Tim Constantine, president of BCBSD, said in an interview that his company has a nonprofit mission, but he objected to having such a mission "mandated" by Maryland. He said the proposed agreement was "not intended to send a message to Maryland, but ... to protect Delaware subscribers and the Delaware plan."

Michael E. Busch, speaker of the Maryland House of Delegates, said the legislature will consider modifications to its reform legislation when it convenes in January. The concern in Delaware and D.C. "seems like an overreaction," he said. "I don't think it's a healthy situation for CareFirst.

"It may be penny wise and pound foolish for them to act without seeing the makeup of the board and how the nonprofit mission is defined," he said.

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