D.C. wants Md. CareFirst law altered

Bill sought to protect consumers in District

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

The District of Columbia insurance commissioner, a critic of Maryland's approach to reform CareFirst BlueCross BlueShield, said yesterday that he is working with his Maryland counterpart to draft a bill he hopes would be sponsored by the Ehrlich administration to alter Maryland's oversight of its largest health insurer.

"The whole purpose and intent of that law," Lawrence H. Mirel, the D.C. insurance regulator, said yesterday, "was to hijack our Blue Cross Blue Shield plan."

Alfred W. Redmer Jr., the Maryland Insurance Commissioner, said he was "very pleased" with a meeting with Mirel last week and "cautiously optimistic" about modifying the Maryland law in a way that would satisfy both Mirel and Maryland legislators and the governor.

Short of such an agreement, the dispute could lead to legal wrangling between Maryland and D.C. over regulatory authority over CareFirst and, potentially, a breakup of the insurer.

Mirel said yesterday that he hoped to see CareFirst remain as a holding company for the Maryland and D.C. plans, but said he was concerned that Maryland's reform law could hurt D.C. consumers. He also said he believed that Maryland lawmakers were attempting to assert authority beyond their state's borders.

Although he spelled out his general concerns, Mirel said yesterday that he was not prepared to say exactly what he wants to see in revisions to the Maryland law. He said that would develop through further discussions with Redmer.

Last month, Mirel issued an order contending that the Maryland law appeared to violate an affiliation between the Maryland and D.C. plans that his office approved in 1997.

A hearing on the issue of whether the Maryland law violated the 1997 order convened for about 20 minutes yesterday at Mirel's office, but, at his request, adjourned until January to allow more time to discuss potential modifications to the Maryland reform legislation.

The Maryland law was passed last spring after Steven B. Larsen, then Maryland insurance commissioner, blocked a CareFirst request to convert to for-profit operation and sell itself to a California company for $1.37 billion. The money would have been paid to foundations or for similar public purposes in Maryland, D.C. and Delaware.

Larsen "screwed up what could have been a very useful deal for all three jurisdictions," Mirel said yesterday. "He gave up not only the possibility of Maryland getting money, but he gave up the possibility of D.C. and Delaware getting money."

"To the extent that someone `screwed up the deal,' it was neither me nor Larry [Mirel]," Larsen responded when contacted after the hearing. "It was CareFirst. They violated Maryland law, and we applied the law."

In his report turning down the conversion and sale, Larsen said CareFirst had failed to negotiate the best price for itself - and the foundations that would benefit. He also concluded that the CareFirst board had improperly approved tens of millions of dollars in illegal deal-related bonuses for its executives as part of the conversion.

In response, Maryland lawmakers passed a law calling for replacement of Maryland's 12 members on CareFirst's 21-member board. They directed CareFirst to remain a nonprofit for at least five years and to function in a way that would benefit Maryland citizens.

In an interview yesterday, Mirel echoed concerns he raised in his order last month and in a letter to Redmer in July - that the Maryland law included the possibility that D.C. consumers could face higher prices if CareFirst lost money on charitable Maryland activities.

Also, he said, although CareFirst is thriving currently, the five-year moratorium on conversions might make it impossible for CareFirst to adjust if market conditions changed.

Redmer, who as a legislator served on the conference committee that drafted the final version of the Maryland legislation, said, "There was never any intention for anybody in a different state to subsidize operations in Maryland." Also, he said, Maryland lawmakers had not intended to dictate the way CareFirst's D.C. and Delaware affiliates did business.

Larsen also said the Maryland law didn't infringe on D.C.'s prerogatives, but "for political reasons, it needs to be clarified" in modified legislation next year.

Mirel's efforts to reform Maryland's reforms are stirring some backlash from D.C. consumer groups.

"The only parties on the planet Earth who have been critical of the decision by Larsen or the legislative aftermath are the folks on the CareFirst payroll and Commissioner Mirel," said A.G. Newmyer 3rd, chairman of the Fair Care Foundation, a consumer-oriented D.C. group that has been critical of the CareFirst deal.

And Joslyn Williams, president of the Metropolitan Washington Council, AFL-CIO, released yesterday an exchange of letters with Mirel in which he wrote that Mirel's "attempt to undercut Blue Cross reform is another stab in the heart of health care in the District of Columbia."

Williams said the Maryland legislation should serve as "a blueprint for action" in D.C.

Mirel replied in a letter Nov. 20 that the regulatory and legislative actions in Maryland were "uninformed and precipitous."

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