CareFirst BlueCross BlueShield Releases Study Defending For-Profit Switch

Maryland-based CareFirst BlueCross BlueShield on Dec. 12 began a "broad public defense" of its proposal to switch to for-profit status, releasing a study that found that health plan members could "enjoy lower premiums" if CareFirst becomes a for-profit company, the Washington Post reports. The report, conducted by the consulting firm Accenture Ltd., comes three weeks after the announcement that CareFirst would be acquired by the publicly traded WellPoint Health Networks in a $1.3 billion stock-and-cash deal (Brubaker, Washington Post, 12/13). Because CareFirst, the largest health insurer in the Washington-Baltimore area, 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). The report said that health plans are "facing a 'squeeze'" that forces them to control premiums in order to stay competitive while also spending more, especially on new technology. Although CareFirst is not "in trouble now," the study said that converting to for-profit status would give it "size and access to capital," adding that insurers "that lack these advantages could find competing more difficult over time." The report also concluded that health plan members "generally consider themselves as well, or better, off" with a for-profit health plan than a not-for-profit one (Salganik, Baltimore Sun, 12/13).

The 'First Sorties'
The report comes a week after the Abell Foundation, a Baltimore-based philanthropic organization, released a study that found CareFirst's conversion to for-profit status would "significantly weaken Maryland's health-care system." That report will be presented today at a joint hearing of Maryland's House Economic Matters and Senate Finance committees (Washington Post, 12/13). The 113-page Abell report details how CareFirst built its almost $800 million cash reserve by "backing away" from its role as an insurer of last resort and "suggests" that CareFirst did so in order to "make itself more attractive for suitors," such as WellPoint. The study said Maryland legislators should not allow CareFirst to "abandon" its pledge "to offer coverage to all comers, regardless of their health or ability to pay" (Kaiser Daily Health Policy Report, 12/4). The Post reports that the opposing studies are the "first sorties" in what is expected to be a "two-year battle" between Maryland regulators and CareFirst. As part of CareFirst's defense of its plans, CEO William Jews mailed the Accenture study to more than 300 business leaders and officials in Maryland along with a letter that said if the merger is approved, CareFirst would offer "enhanced customer service and new innovative products." He added that CareFirst could only remain a "strong and viable" insurer if it "drops its not-for-profit status and merges" with WellPoint (Washington Post, 12/13). The Accenture report is available online. The Abell study also is available online.