ANNAPOLIS – CareFirst BlueCross BlueShield’s proposed conversion from non- to for-profit and its subsequent sale to a California health care company was placed in jeopardy with legislation passed by lawmakers – and that’s just fine with them.
“We didn’t just put a stake through its heart,” said Delegate Kumar Barve, D-Montgomery, Tuesday at a news conference. “We put it in the coffin, buried it six feet down” and threw dirt on it.
But the deal isn’t dead just yet.
The measure still awaits Gov. Parris N. Glendening’s signature.
“He’s going to take a good look at this bill before deciding on signing it,” said Raquel Guillory, a spokeswoman for the governor.
She said she was unsure of when the governor would make his decision.
CareFirst will have to overcome considerable legal hurdles imposed by the bill, passed in the waning moments of the Maryland General Assembly Monday.
Lawmakers piled all their restrictions on the sale into one measure – including one requiring its proposed sale to WellPoint Health Networks be paid out in cash.
That constraint could essentially stop the sale.
Under the original deal, WellPoint would pay Maryland, Delaware and Washington, D.C., $1.3 billion to purchase CareFirst. Maryland stood to receive about $850 million of that amount in WellPoint stock.
“There is a rumor that the all-cash provision is a deal breaker,” said Delegate Shane Pendergrass, D-Prince George’s, who, along with Delegate Van Mitchell, D-Charles, are the primary sponsors of the bill.
“But, I don’t know if it’s true. I don’t think I believe it,” Pendergrass said. “I think WellPoint still wants to get a foothold here. But I may be surprised, and that’s fine.”
For now, WellPoint is unsure how to proceed, said Ken Ferber, vice president of corporate communications for the company.
WellPoint, often referred to as the “darling of Wall Street,” provides health care services and has about 16,300 employees with more than 80 offices nationwide.
“We consider that there have been material changes to the deal,” Ferber said.
WellPoint, however, has yet to see the actual legislation and won’t make any decisions until analyzing the bill, he said.
“We’re not going to speculate,” Ferber said. “We’re going to look at it and evaluate it.”
The bill also prohibits CareFirst executives from receiving the estimated $30 million in bonuses the company said they would get if the sale takes place.
Lawmakers speculated the executives were motivated to sell by their potential financial gain, which prompted Delegate Dan Morhaim, D-Baltimore County, to sponsor the measure that ended up in the omnibus bill.
CareFirst officials have said the compensation package for its executives is necessary to help retain them if the sale takes place.
Another part of the bill provides the Legislature with 90 days to review the decision of Insurance Commissioner Steve Larsen on the conversion, and allows lawmakers to stop the sale within that period.
The law requires Larsen to determine if the sale should take place by finding whether it will harm the public interest. However, another CareFirst bill on its way to Glendening would require the company to prove its sale is in Maryland’s public interest.
Larsen has said he is assembling a panel of experts to examine the possible effects if the sale goes through, and said he expects a final decision in about 12 months.
Despite the steps taken against the proposed conversion, CareFirst was glad the conversion possibility is still alive.
“We are very pleased that the Legislature has supported a continuing strong and viable CareFirst BlueCross BlueShield presence,” the company said in a statement. “We strongly believe WellPoint is the right partner for us. We remain confident that we can demonstrate the benefits this transaction can have for our members and the communities we serve.”
The bill passed 134-0 with one abstention. After House Speaker Casper Taylor, D-Allegany, announced the vote, delegates applauded.