Report: CareFirst has duty to give more

It should spend millions on D.C. area, group says

December 06, 2004|By William Patalon III | William Patalon III,SUN STAFF

CareFirst BlueCross BlueShield should be spending between $50 million and $100 million a year on community services in the nation's capital - compared with a projected $1 million this year - to meet its obligations as a nonprofit insurer, a Washington-based advocacy group contends in a report to be released today.

CareFirst "has an obligation to serve the community - a charitable obligation - and we don't think it's meeting its charitable obligation," said Walter A. Smith, executive director of the DC Appleseed Center For Law and Justice, a decade-old public-interest organization that has been pushing for CareFirst reforms, and which commissioned the report. "We determined it should be spending $50 million to $100 million carrying out its charitable mission. In reality, it's spending only $1 million - it's not satisfactorily complying with its mission."

The report is the latest development in the CareFirst saga, which boiled over last year when Maryland blocked the company's attempt to convert itself into a for-profit operation and then sell out to a California firm for $1.3 billion. Dispute over the plan - as well as the executive bonuses tied to the deal - prompted state lawmakers to enact legislation that locked in CareFirst's nonprofit status for at least five years.

DC Appleseed's report, which looks at the Owings Mills-based insurer's activities in the capital region, comes at a time when CareFirst says it's working on a plan of its own that will address community service responsibilities for the entire company.

DC Appleseed focused on Group Hospitalization and Medical Services Inc., or GHMSI, the D.C. affiliate of CareFirst, the state's largest health insurer. GHMSI covers about 960,000 members in Montgomery and Prince George's counties, Washington and Northern Virginia - 30 percent of the company's 3.2 million members, said CareFirst spokesman Jeffrey W. Valentine. Of the overall company's projected $7.3 billion in revenue for this year, Appleseed estimates the Washington affiliate accounts for about $2 billion.

CareFirst officials declined comment, saying Friday that they had just received an advance copy of the report. Insurance commissioners for Maryland and Washington were unavailable.

However, CareFirst and GHMSI "are supportive of efforts to solve the many health care challenges facing Greater Washington [and] ... want to play a role in helping to address those problems," CareFirst chief executive William L. Jews said in a statement. However, "especially in these times of uncertainty, it is essential that we have the resources available to meet our members' needs regardless of circumstance. CareFirst can not do anything that would jeopardize the company's financial ability to protect its policyholders."

Last year, CareFirst reported a profit of $171.3 million.

With its federal charter, GHMSI has a legal obligation to meet its charitable obligations, and with a surplus of nearly $400 million, has the resources to do so, DC Appleseed says in its report. By spending between 2 percent and 3 percent of its $2 billion in annual revenue - a percentage akin to peer insurers - GHMSI should be able to spend $50 million to $60 million on health-oriented programs in the community now, and as much as $100 million by 2008, while not harming itself financially, DC Appleseed said.

Del. Shane E. Pendergrass, a Howard County Democrat and the author of last year's CareFirst reform bill, said she hadn't seen the DC Appleseed report, and said her focus has been on the overall holding company and the Maryland affiliate. But she also underscored that the company's first responsibility was to its members: If the surpluses could be used to keep premiums from increasing, that should be the top priority, she said.

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