ANNAPOLIS – Maryland health care provider CareFirst has been criticized for its decision to convert to a for-profit company, but a North Carolina study of Blue Cross plans in four states may quiet some critics.
A study commissioned by the North Carolina Department of Insurance finds that Blue Cross conversions in California, Georgia, Virginia and Missouri have not resulted in higher rates or limited access to health care coverage.
“We are not alone in perceiving the option of going to for-profit,” said Maryland CareFirst BlueCross BlueShield spokesman Jeff Valentine.
In Virginia, there was no indication that the conversion changed BlueCross’ corporate culture and it still serves as the “insurer of last resort” according to the study.
One negative aspect is that open enrollment is down significantly, and in both Virginia and California it is harder for people with health problems to get coverage. Regulators attribute this to small group reform laws.
“I do not think there was any real big impact when BlueCross of California converted its managed care business from not-for-profit to for-profit. We had learned our lessons in the early 1980’s about losing money,” said a BlueCross of California executive in the report.
The report will be used in a larger report to the North Carolina Insurance Department.
CareFirst said the report shows the necessity of a conversion.
“We are seeing a need to position ourselves to be a national player, we are surrounded by competitors to our north and south who are for-profit companies,” said Valentine.
If CareFirst converts to for-profit, the state is requiring it to transfer all assets to the Maryland Health Care Trust Foundation, which will hold the money and distribute it for future improvements in health care.
Many states direct profit from conversion to these types of foundations that are established to improve health care.
The General Assembly and CareFirst customers are wary of the conversion and merger with California-based, WellPoint Health Networks Inc., fearing a reduction of benefits, corporate misconduct and higher premiums.
Premiums may go up, Valentine said, but not as a result of the transaction, as WellPoint has said under oath.
A health economist agrees.
“Underlying cost trends that cause plans to cover cost by increasing premiums is true across the board. I don’t think you can claim that this has anything to do with conversion or merger,” said Jody Grossman, associate director and health economist for the Center for Studying Health System Change.
But subscribers are wary and they and others are trying to block the sale.
A Talbot County resident recently filed a lawsuit against CareFirst and seven top executives claiming that executives are only concerned with bonuses and severance payments.
CareFirst has not yet been served with the papers and has no comment, said Valentine.
CareFirst’s board of directors, which includes a nun, a professor of ethics and clergymen, solicited outside compensation experts to advise them about bonuses and severance payments, Valentine said.
“There’s a lot of skepticism about anything cooperate these days because of a few bad eggs in the basket,” Valentine said.
The Legislature prohibited executives from receiving compensation from this transaction once they learned that bonuses totaled more than $30 million.
Around the country in less competitive markets, BlueCross plans continue to operate as non-profit because there is no need to compete with larger companies for members, said Ken Ferber spokesman for WellPoint.
“National trends among Blues plans argue that benefits from converting to for-profit will allow them to acquire better access to capital. This can allow them to purchase information systems or develop new products and services, but some Blues plans say they can do all that and stay a non-profit,” said Grossman.
Blue Cross of California was bought by WellPoint in 1996 and converted to for-profit.
The company has been enormously successful and enrollment has increased rapidly since, according to the North Carolina study.
In California, BlueCross and BlueShield are two separate organizations unlike Maryland’s CareFirst, BlueShield of California continues to operate as a non-profit.
“When we (BlueCross) became for-profit, both plans had about 2 million subscribers. About nine years later we have about 6 and a half million subscribers, they (BlueShield) still have 2 million,'” said Ferber.
“In some parts of the country it’s been very effective, but it certainly won’t work for every Blues plan.”
“Everyone has a right to their opinion but they don’t necessarily have all the facts. The only person who has all the information is Commissioner Larsen,” said Debbie McKerrow, director of communications and consumer services for the Maryland Insurance Administration.
Commissioner Larson is expected make a decision on the deal by January or the end of February. – 30 – CNS-10-25-02