CareFirst vows to earmark some profits for doing good

An apparent response to Annapolis warning

April 02, 2004|By M. William Salganik | M. William Salganik,SUN STAFF

Criticized in the past few years for behaving like a for-profit company, CareFirst BlueCross BlueShield has promised to set aside some of its earnings for "not-for-profit" purposes.

Beverly B. Byron, CareFirst's board chairwoman, made the pledge in a letter last week to Del. John Adams Hurson, chairman of the House Health and Government Operations Committee. Hurson, a Montgomery County Democrat, had warned that he wanted to see a plan for charitable activities before his committee would act on legislation that CareFirst is seeking to preserve its Delaware and Washington, D.C., affiliations.

Byron said yesterday that the board has not decided how much money to earmark, what type of activities to underwrite or whether to create a new foundation or work through existing organizations.

In her letter, she said CareFirst would consider such activities as research on expanded access to health services, "innovative initiatives" on public health problems and "lower-cost health coverage products" for those who can't now afford insurance.

CareFirst reported $171.3 million in net earnings for 2003, up 64 percent from the previous year.

"It is my hope that in the not-too-distant future," Byron wrote to Hurson, "our nonprofit mission will be so evident in our actions that it will not be called into question."

CareFirst's commitment to its nonprofit mission became a pivotal issue during its effort to convert to for-profit status and be sold to a California insurer.

Steven B. Larsen, then state insurance commissioner, blocked the $1.3 billion deal last year, ruling it was not in the public interest. CareFirst, Larsen wrote in a stinging rebuke, had "assumed all the operating characteristics and corporate goals and mission of a for-profit company." He also sharply criticized the board of directors, which he said "did not question the action by management to abandon its corporate mission."

In the aftermath of Larsen's report, Maryland legislators approved a reform law that required that the company remain nonprofit and replaced some of CareFirst's board members at the end of last year. More board members are to be replaced by July.

The law rankled insurance commissioners in Delaware and the District of Columbia, who feared the new Maryland requirements might come at the expense of CareFirst customers in their jurisdictions. CareFirst is seeking legislation this year that would clarify last year's reform law to satisfy the other regulators.

"If the bill does not pass, we will have D.C. and Delaware disaffiliate," Byron said yesterday.

Byron said CareFirst's board had already begun to refine its mission as a nonprofit even before Hurson's demand. She also said achieving the record earnings in a year CareFirst was mired in controversy "speaks very highly of management."

Hurson said yesterday that he appreciated the board's efforts to develop charitable activities, and hoped legislators would be involved as CareFirst decides how to proceed.

Meanwhile, Delaware and District of Columbia regulators have scheduled hearings for later this month to see if the legislation that emerges assuages their concerns.

Lawrence Mirel, the D.C. insurance commissioner, said yesterday that he wants to ensure that Washington consumers are not subsidizing activities that benefit only Maryland. "Playing good corporate citizen is a good idea," he said, "but Maryland ought not dictate for D.C."

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