DOES
THE CAREFIRST CONVERSION AND
In
November 2001, CareFirst, the state’s largest health insurer of 3 million
people, announced its intention to convert from its nonprofit status to a
for-profit insurer and sell itself to WellPoint Health Network for $1.3
million.
The
reaction to the plan by the State’s Hospital Association, medical societies,
health care advocacy groups, the general public and the Maryland General
Assembly was swift and overwhelmingly negative. The Assembly sentiment was summed up by
then-House Speaker
Although
a nonprofit insurer, CareFirst’s business practices over the past several years
have more closely resembled those of a commercial insurer. CareFirst has jettisoned its unprofitable
Medicaid and Medicare HMO programs.
This move left thousands of poor and sick Marylanders without health
coverage and thousands of seniors without prescription drug coverage.
CareFirst
has twice requested, and twice been denied, huge monthly premium hikes – as
much as 247% - in its open enrollment program for over 5,000 high health risk
individuals who cannot obtain health coverage at an affordable cost. In July 2003, the open enrollment plan will
be replaced by a state-run high-risk pool, similar to pools already operating
in 30 states.
In
May 2001, CareFirst withdrew its subsidiary HMOs, FreeState and Delmarva, from
both individual and small group insurance markets in
The
Legislative slow burn over CareFirst’s conduct erupted during the 2002
session. Legislation, backed by House
and Senate leadership, was approved to significantly hamstring the deal. One measure, now law, gave the General
Assembly the final word on the CareFirst conversion and sale. No matter how Commissioner Larson rules on
the deal, the General Assembly will determine whether it sails or sinks.
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In
March 2002, fuel was added to the fire.
The extent to which the CareFirst CEO, William L. Jews, and his
executives would benefit from the conversion and sale was revealed. Jews, who warns a $2.7 million annual
salary, stands to collect $39.4 million in bonuses, severance and tax
benefits. Another $80 million would be
split among other CareFirst executives.
Although the 2002 Assembly passed law prohibiting executives from
obtaining merger bonuses and incentives, the CareFirst Board approved the
gigantic payout package before the law became effective.
CareFirst
continues to claim that its conversion and sale to WellPoint will benefit
Marylanders by providing more accessible and affordable health insurance. Frankly, I don’t believe that a for-profit
CareFirst, owned by WellPoint, a corporation based in another state, will
improve the quality or cost of health care and health care coverage for
Marylanders.
It’s
worth noting that CareFirst currently spends 88% of its premium dollar on
actual health care. By comparison,
WellPoint spends 75% of its premium dollar on actual health care. Certainly, we would be foolish to believe that
as a member of the for-profit WellPoint network, the percentage of CareFirst’s
premium dollar spent on health care will increase or even remain the same.
Additionally, I am very concerned that WellPoint
refused to give Insurance Commissioner Larsen any information about its
underwriting or pricing policies, by which its insurance coverage and premiums
are decided. Therefore, we do not have the information we need to make valid
comparisons with CareFirst’s policies.
CareFirst CEO Jews defends the size of the bonuses and incentives, declaring
that they “pale relative to the opportunity to help people.” I don’t buy it. If the sale to WellPoint goes through,
millions will be paid to high-salaried executives that would be better spent on
providing health care coverage to the uninsured and reduced premiums for the
insured. The total payout of $119.6
million to the CEO and other CareFirst executives would be enough to pay for
one year’s health insurance for 36,000
The
1937 General Assembly, which issued a charter to Blue Cross to operate as a
nonprofit insurer of last resort, would not recognize the CareFirst BlueCross
BlueShield of today. The Blues of today
have become an insurer more focused on profit, than providing affordable health
insurance to the greatest possible number of Marylanders.
I
can see no benefit to the people of
When
the matter reaches the House Health Committee, on which I serve, and the full
House of Delegates, I will vote against the CareFirst conversion and sale.
Sincerely,
Eric
Bromwell
EB:ih