Maryland Lawmakers to ‘Thwart’ Sale of CareFirst to WellPoint

Maryland legislators opposed to the sale of not-for-profit insurer CareFirst BlueCross Blueshield to California's WellPoint Health Networks say they plan to "thwart" the deal "and force the health insurer to better protect the poor," the Washington Post reports. Leaders in the House of Delegates, Senate president Thomas V. Mike Miller (D), Gov. Parris Glendening (D) and Attorney General Joseph Curran (D) have all "voiced misgivings" about the proposed sale (LeDuc/Mosk, Washington Post, 12/1). WellPoint has agreed to pay $1.3 billion in a stock and cash deal to acquire CareFirst, the largest health insurer in the Washington-Baltimore area. Because CareFirst is an "insurer of last resort" in Maryland, Delaware and Washington, D.C., insurance regulators and Congress would have to approve the company's conversion to for-profit status before it could be sold to WellPoint (Kaiser Daily Health Policy Report, 11/26). Because most of CareFirst's business is in Maryland, approval of the conversion there is "critical." But the Post reports that lawmakers there "are less interested in the company turning into a for-profit insurer than they are in returning [it] to its original mission of covering the poor."

Historical Role as Not-For-Profit
If the sale is approved, the profits from the sale -- expected to be at least $1.3 billion -- would be divided among Maryland, Delaware and Washington, D.C., to "compensate for past tax advantages the not-for-profit has enjoyed" (Washington Post, 12/1). As a not-for-profit insurer that offers coverage to anyone "regardless of health," CareFirst receives "tens of millions of dollars" in hospital discounts and tax breaks. Also, not-for-profit insurers receive a 4% discount on hospital rates in Maryland. CareFirst earns $30 million annually through the hospital discount. The Baltimore Sun reports that CareFirst has "increasingly" withdrawn from profitable markets and has forced 200,000 Marylanders -- mostly the "poor, elderly or sick" -- to obtain other health insurance. For example, CareFirst in 1999 stopped offering its Medicare+Choice plan in 17 rural counties, but by the end of the year, it had dropped from the Medicare program "altogether." Last year, CareFirst said it would "cut back" on its Medicaid plans, but this year, it dropped the program entirely, forcing 40,000 patients into different HMOs. While CareFirst continues to offer "open enrollment" policies -- coverage that does not require a health exam -- it has attempted to increase the premiums for such coverage by 47% last year and 50% this year (Salganik, Baltimore Sun, 12/2).

CareFirst Criticism
Glendening has "urged" the attorney general and state insurance commission to "scrutinize the deal" and investigate other alternatives to ensure that "policyholders are best served." Glendening spokesperson Michael Morrill said, "[CareFirst] abandoned their initial mission even as they've received tax breaks for that mission. They've walked away from rural health care, they've walked away from the urban and poor people" (Washington Post, 12/1). State Sen. Robert Neall (D) said money from hospital discounts and tax exemptions "should have been deployed to take people on the edge of the market and provide them affordable health insurance." John Picciotto, CareFirst's executive vice president, said he is "frustrated" that the insurer is being criticized for exiting markets and raising premiums for open enrollment policies, because other insurers have acted similarly. "We understand the decisions we make are looked at through a different prism because we're not-for-profit. Unfortunately, we don't have the luxury, in a competitive world, of making bad business decisions" (Salganik, Baltimore Sun, 12/2).

AG Urges Scrutiny
In a Baltimore Sun opinion piece, Curran argues that because CareFirst has "been critical to the creation and preservation" of the health care system in Maryland, the state must consider how being sold to WellPoint would impact the "accessibility, availability and affordability" of health services, particularly for "vulnerable individuals." Curran says he is "concerned" that replacing the local not-for-profit insurer with a national for-profit company would result in a "decreased level of service" for patients. He adds that Maryland's share of the proceeds from the sale "would not come close" to covering its "potential loss" of the $400 million annual exemption the state receives from Medicare and Medicaid. Also, the payment would "not be nearly enough" to develop a plan with the same "name recognition and public trust" as CareFirst to be a "new insurer of last resort." Curran concludes that regulators have "an obligation" to examine the proposed deal, because "to blindly accept the money and allow the conversion without a thorough review would be nothing less than irresponsible" (Curran, Baltimore Sun, 12/3).