Officials of CareFirst Blue- Cross BlueShield, the state's largest health insurer, officially unveiled - and defended- yesterday a new plan to fulfill its nonprofit mission.
"We will not be driven by the bottom line to the extent the company was previously," Michael R. Merson, chairman of CareFirst's board, told members of the Senate Finance and House Health and Government Operations committees in separate briefings in Annapolis.
The outlines of the plan became clear last week, after John Adams Hurson, the Montgomery County Democrat who chairs the House health panel, was briefed by Merson. After the briefing, Hurson called the CareFirst initiative "pathetic."
Merson told lawmakers yesterday that the insurer's plan was "an exciting program" that represented more than $90 million a year in public benefits, of which $60 million was obtained by keeping premiums lower.
Also, he disclosed that the CareFirst board had commissioned an actuarial study of whether its surplus - $338 million at the end of 2003, according to insurance regulators - is larger than needed, potentially freeing up more money for public purposes. "If we can do more, we seek to do more," he told Hurson's panel.
Overall, he said, the program represented an effort to respond to concerns expressed by legislators after CareFirst's unsuccessful attempt to convert to a for-profit company to permit its sale to a California insurer.
A 2003 law ousted a majority of CareFirst's board members and required it to remain a nonprofit. Merson was one of the replacement board members selected by a legislative nominating committee.
Legislators were inquisitive and at times skeptical yesterday. But they were not hostile.
Sen. Thomas M. Middleton, the Southern Maryland Democrat who chairs the finance panel, said CareFirst's presentation had represented a philosophical outline, but lots of details remain lacking. "Any news that is going to make health care more affordable is good news," he said.
Unlike last week, Hurson wasn't directly critical yesterday. "The ship is starting to turn," he said, "but is it enough?" In particular, he questioned whether the $60 million in premium moderation represented "a commitment to a nonprofit mission" or an effort to gain a pricing advantage over competitors.
Merson answered that in devising the plan, the board had not considered its competitive position, but rather that it had enough cash on hand "to benefit our subscribers."
John M. Colmers, chairman of the board of CareFirst's Maryland affiliate, told the Senate panel, "We are willing to earn less money and provide $60 million to make our products more affordable." He noted that CareFirst's action could pressure competitors to moderate rates as well.
CareFirst officials said they didn't have answers to many lawmakers' questions, such as how much would premiums go up, how many subscribers would benefit from new patient safety measures and what would the insurer do to meet its goal to reduce health disparities among different ethnic groups.
Several senators pressed CareFirst on executive compensation. Merson said the company's chief executive, William L. Jews, had been paid $3.2 million in base and incentive pay in 2004. That's up from $3 million in 2003, according to reports filed with the Maryland Insurance Administration.
Sen. E. J. Pipkin, a Republican from the Upper Shore, expressed surprise that executive pay has remained as high or higher, and that the management team that had tried to sell the company was still in place. He noted that the then-insurance commissioner, who blocked the deal in 2003, had criticized the executives for tainting the deal in their effort to get large bonuses.
"Some of the things that happened, in the private sector, many managers would have been fired, or worse," he said. "It's like it didn't happen."
Merson said the questioning at the two hearings had been "probing and challenging," but fair and appropriate.
On executive compensation, he said the company had hired a new consultant to take a "fresh look." Based on figures from other nonprofit insurers and the experience of the management team, he believed amounts were appropriate.
In addition to the rate moderation, Merson and Colmers said the insurer would spend $8.7 million this year on efforts to improve medical quality and reduce disparities in care.
Colmers told lawmakers doctors would be paid a bonus of $50 a patient, up to $20,000 per physician, for participating in quality initiatives such as developing electronic patient records.
