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Community leaders, lawmakers challenge CareFirst conversion

Opponents of CareFirst BlueCross Blue Shield’s proposed conversion to a for-profit company had their day in Annapolis yesterday, as a legislative committee heard testimony on several bills concerning the insurer’s current and future operations. Members of the House Economic Matters Committee seemed to concur yesterday with the community leaders who came out to support several bills that would regulate CareFirst, should the Baltimore-based company be acquired by WellPoint Health Networks of California and convert to for-profit status.CareFirst lobbyist Frances P. Doherty was the only one to speak against the six bills, facing tough questions from legislators about CareFirst’s mission as the insurer of last resort and its executives’ intentions in seeking to become a profitable entity.In speaking of the company’s conduct in recent years — specifically its withdrawal from the Medicaid market last year — W. Minor Carter, a lobbyist for consumer group Maryland Cares, drew laughter when he said CareFirst “went from a community center to a country club. It changed from CareFirst to care less.”

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The bills heard yesterday included House Bill 754, sponsored by Committee Chairman Michael E. Busch, D-Anne Arundel, in response to CareFirst’s withdrawal from Maryland’s Medicaid program last year.CareFirst has a BlueChoice managed care product that could serve — and is serving — some of those previously insured through FreeState. However, to join BlueChoice, members must reapply, and many of those are too high-risk to meet the program’s requirements, said proponents of Busch’s bill.The bill would require other companies intending to withdraw from a market, if they have an affiliate company in the same market, to shift all those beneficiaries to the affiliate without forcing them to reapply.“It’s unfortunate this bill was not in place a year ago to prevent this,” said Pegeen Townsend, lobbyist for the Maryland Hospital Association, referring to the FreeState situation.But Doherty said it would not have been fair to BlueChoice members to allow former FreeState beneficiaries to join the program without meeting the requirements. BlueChoice members would have to pay higher premiums to compensate for the increased cost of the high-risk FreeState members, she said.Also heard yesterday was testimony on House Bill 231, which would revoke CareFirst’s 2 percent tax deduction based on the fact that it is no longer participating in the Medicaid market. Revenues from the tax would go to fund the state’s short-term senior prescription drug program.Doherty said the bill was unnecessary, adding that a process already is in the works to remove CareFirst’s exemption and apply the money to the prescription program.Legislators grew more inquisitive during testimony for two bills that would limit the salaries of CareFirst’s board of directors and prevent its executives and directors from benefiting financially from the company’s proposed acquisition.“This is a vehicle to explore the facts,” said Del. Dan K. Morhaim, D-Baltimore County, of his bill, HB 141, which would prevent the company’s officers from benefiting in the acquisition. “We need to look at the motives of the executives in this Enron-ization of CareFirst.”Carter said that, in WellPoint’s acquisition of the Georgia BlueCross BlueShield plan, the top 34 employees of the carrier received more than $41 million in bonuses after the conversion.Doherty said the motives of CareFirst’s executives have been honorable and the bill is unnecessary.“I very honestly believe when we did this deal [it was] in the best interest of the company to keep us competitive and viable,” she said.Doherty added that on March 1, CareFirst will submit to the insurance commissioner the portion of its proposal that includes the executive compensation packages.The committee also heard Busch’s HB 448, which would prevent WellPoint and CareFirst from compensating the state for the conversion using stock.“I don’t think it’s appropriate for the state to be a stockholder in an insurance company that competes in the Maryland marketplace,” Busch said. Doherty said the bill is unnecessary, because the WellPoint/CareFirst agreement already gives the state options in how it should be compensated.But Del. Anthony G. Brown, D-Prince George’s, pointed out that WellPoint can appeal any decision the insurance commissioner makes as to how the state should be compensated.“But a legislative act is not appealable,” he said.Many of those speaking at the hearing — including the legislators — looked forward to a hearing for HB 1254, which would prohibit the conversion. A hearing has not yet been scheduled.