ANNAPOLIS – With CareFirst BlueCross BlueShield as Maryland’s health insurer of last resort, lawmakers worried Tuesday how the poor and underinsured will be cared for if a planned buyout of the company goes through.
“What is it that is fundamentally out of balance . . .that you can’t meet your capital needs?” asked Delegate Kumar Barve, D-Montgomery. “That’s what I’m going to want answered.”
At a hearing before the House Economic Matters Committee, lawmakers questioned the motives of CareFirst’s $1.3 billion purchase proposal by WellPoint Health Networks Inc. They called on company vice president Fran Doherty and Insurance Commissioner Steven B. Larsen to justify the simultaneous planned conversion to a for-profit, rather than a nonprofit, company.
Barve asked Doherty directly if the purpose of the conversion was so the company could back out of its role as the insurer of last resort. He also asked if the reason behind the sale was all about money.
State law requires that its last-resort insurer be a nonprofit. CareFirst has filled that role, and has been receiving tax exemptions in exchange for its open enrollment of people who are considered high risk. Those high-risk people include the poor or terminally ill who would not be insured otherwise.
Doherty argued the company needs to convert so it can compete with other insurance companies in the area as well as to generate enough revenue to cover the $60 million the company will need for expenses over the next five years.
Why does a company that has more than a $500 million surplus, Barve said, need to be sold to raise $60 million in capital expenses.
Economic Matters Committee Chairman Michael Busch, D-Anne Arundel, also dismissed Doherty’s contention that the company would remain committed to Maryland residents, saying “I don’t think you can make that commitment because you’re being sold to a company out in California.”
The State Insurance Commissioner must approve such a sale, and Larsen said he would have to wait for independent experts to evaluate the possible repercussions of the company’s plan before making a decision. He told lawmakers that he hoped to have an answer in 12 to 15 months.
For the sale to go through, Larsen said he would have to make the determination that the conversion would not go against the public interest. To determine that, he said he would also have to examine how the conversion would affect health care consumers.
“The job of our experts will be to judge the rationale and theories put fourth by (CareFirst),” Larsen said. If the sale takes place, the state would have a couple options — seek another insurance company to take CareFirst’s place or set up a state-sponsored charitable program to care for the uninsured.
The General Assembly also could setup roadblocks to prevent the conversion from taking place. Some lawmakers may introduce legislation that would force CareFirst, rather than Larsen, to prove the conversion was in the public interest.
Doherty told the House Appropriations Committee that if that were to happen, CareFirst would not try to fight it.