January 14, 2005|By M. William Salganik | M. William Salganik,SUN STAFF
CareFirst BlueCross Blue- Shield, the state's largest health insurer, will unveil what it calls a multimillion-dollar commitment to fulfill its community obligations as a nonprofit, but the plan was quickly labeled "pathetic" yesterday by the chairman of a key legislative committee.
Del. John Adams Hurson, chairman of the House Health and Government Operations Committee who was briefed by CareFirst officials, criticized the insurer's board for taking a year to commit what he said amounted to $8 million in new charitable spending.
At the same time, he said, the insurer had decided "in a few minutes" that installation of a new board amounted to a change of control, an interpretation that could mean millions in additional compensation to top executives if they are terminated.
Michael R. Merson, chairman of the CareFirst corporate board, defended CareFirst's charitable plan, which he said represented an annual commitment of more than $90 million, as "making enormous progress toward fulfilling the nonprofit aspect of our mission."
He said he would continue to work with Hurson and other officials - including those in the District of Columbia and Delaware, where CareFirst also operates - to meet public needs and make sure the insurer lives up to its obligations.
Yesterday's exchange has potential for re-igniting the controversy that began in November 2001 when CareFirst filed for state approval to convert to for-profit operation and sell the company for $1.3 billion to a California insurer. That deal was tainted by lavish executive bonuses, the state insurance commissioner ruled in blocking the sale in 2003.
The legislature subsequently moved to reform CareFirst, passing a law that required replacing Maryland members of CareFirst's board and obligated the health insurer to remain nonprofit.
The board turnover was completed in July, and the new board, chaired by Merson - who was chosen by a state-selected nominating committee - has been working since then to develop a plan to meet its nonprofit obligation.
House Speaker Michael E. Busch said yesterday that it was too early to tell if CareFirst will become a major issue in the legislative session that opened this week. He expressed confidence in Hurson and in CareFirst's new leadership.
Merson and Hurson - who met to discuss the plan yesterday - gave similar accounts of the insurer's proposal but vastly different assessments of its impact.
The four major elements of the plan, according to both, are:
Premium stabilization. Merson said CareFirst's board decided to use about a third of its projected $175 million in net earnings for 2005 - about $60 million - to reduce premiums or moderate increases by an average of 1.5 percent. Merson said the decision was a response to "employers' anguish over rising premiums" and concern that employers might drop coverage or shift more cost to workers.
CareFirst has about 3.2 million members, about 2 million in Maryland, but nearly half of those are in plans for self-insured employers, who would not receive the savings. Merson said company actuaries were working on how to apply the reduction to CareFirst's products.
Hurson, however, said the rate moderation could be an effort to be "competitive in the marketplace" against rivals. This is the largest piece of the overall plan, which the insurer calls the "CareFirst commitment."
Senior prescriptions. CareFirst said it should get credit for applying the money it gets from a state tax break - about $22 million this year - to provide subsidized prescription coverage for moderate-income seniors. Hurson characterized this as a state contribution, not CareFirst's. CareFirst says that before the prescription program started, it had used the tax savings to enhance its profitability, but agreed to divert it to help seniors.
New initiatives. Merson said CareFirst would commit $8.7 million for "initial investments" in programs to address such areas as patient safety and disparities in health care among different ethnic groups. Hurson said this sounded promising, although he was awaiting more details of how this part of the program would work.
Charitable contributions. CareFirst said it would maintain contributions to local charities at its current level of $2.5 million a year.
Hurson's committee and the Senate Finance Committee will hear from CareFirst on Tuesday, when the insurer officially unveils its plan. Hurson said he would consider legislation to dedicate a portion of CareFirst's premium revenue to charitable activity.
The Montgomery County Democrat said he saw that as a potential source of funds to provide care for more of the state's uninsured.
Hurson unsuccessfully sought last year to subsidize health clinics for the uninsured with an HMO premium tax. But the legislature this week enacted a malpractice reform bill that uses an HMO tax to reduce doctors' premiums and increase Medicaid payments.
