Redmer rejects Del. plan for looser Blue Cross ties

October 05, 2004|By M. William Salganik | M. William Salganik,SUN STAFF

Maryland's insurance commissioner rejected a plan yesterday that would have allowed Blue Cross and Blue Shield of Delaware a looser affiliation with CareFirst BlueCross BlueShield, saying he was concerned the plan could hurt CareFirst and its Maryland subscribers.

The decision by Commissioner Alfred W. Redmer Jr. could lead to the Delaware plan splitting from CareFirst altogether - which Redmer said he wasn't opposed to, as long as CareFirst receives fair compensation - or to another attempt to fashion a relationship that regulators will approve.

CareFirst, based in Owings Mills, is a holding company that operates nonprofit Blue Cross plans in Maryland and the District of Columbia as well as in Delaware. CareFirst sought to convert all its pieces to for-profit operation and sell itself, but the deal was blocked by Redmer's predecessor, Steven B. Larsen.

In the wake of the failed sale, Maryland legislators moved to reform CareFirst, locking in its nonprofit mission and replacing most of the board. Regulators in Washington and Delaware objected, saying Maryland's action could hurt subscribers in their jurisdictions. The district issue was settled this year with some modifications in the CareFirst reform law.

However, the Delaware Blue Cross board moved last year to change its affiliation with CareFirst. It proposed a deal under which it would still be administered by CareFirst, but would be able to divorce itself if it was unhappy with the reform path. Delaware's insurance commissioner approved the deal, but Redmer, who studied it for nearly a year, turned it down yesterday.

The new arrangement, he said, would give the Delaware plan the benefit of CareFirst's management at little or no cost, amounting to the Delaware Blues being "subsidized" by subscribers in Maryland. "I don't want them to use the executive talent at CareFirst to help them build their business, without compensation," Redmer said.

Redmer's decision was issued late in the day, and officials of CareFirst and the Delaware Department of Insurance could not be reached for comment. A Delaware Blue Cross spokesman referred questions to CareFirst.

Redmer said CareFirst can appeal the decision, submit a new plan of affiliation, allow the status quo to continue or apply to split off the Delaware Blues.

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