ANNAPOLIS – Maryland legislators took a break from the anxiety of the budget on Tuesday and focused on what’s likely to be the next most dominant legislative issue — the CareFirst conversion.
State Insurance Commissioner Steven B. Larsen updated legislators in the House and Senate on CareFirst BlueCross BlueShield’s bid to convert to a for- profit company, a move he will vote up or down next month.
“Next to the budget, the biggest issue of concern is the conversion,” said Senate Finance Committee Chairman Thomas “Mac” Middleton, D-Charles, during the joint hearing.
Larsen gave lawmakers a 27-page report compiled by the Maryland Insurance Administration, presenting its process and analysis and the status of the conversion.
Well Point Health Networks, a for-profit insurer based in California, offered $1.3 billion to purchase CareFirst BlueCross BlueShield, Maryland’s largest nonprofit health insurance provider, in Nov. 2001.
CareFirst has said it can no longer compete as a nonprofit insurer with others in the market.
What has transpired since is an intense, thorough analysis of what the conversion and sale would mean for Marylanders. This analysis has included a year of public hearings, expert reports, and depositions by CareFirst and Well Point executives.
“Our analysis has been very extensive, 174 speakers, 55 phone calls, and 785,000 pages of documents,” Larsen said.
Dominating the briefing, however, was a discussion of an estimated $33 million in bonuses CareFirst executives are scheduled to receive upon completion of the transaction.
Larsen said his office will review Maryland’s two anti-bonus statutes and determine their appropriateness.
“We could approve the conversion but conclude that the bonuses violate one or both of the statues,” Larsen said.
The commissioner also addressed the possible $800 million to $1 billion in proceeds the state could receive from the conversion.
With the state facing an estimated $1.7 billion deficit, the proceeds could be a key to a balanced budget. Or they could be used to create a foundation to reinsure clients unable to any possible premium increase, should that result from the move, Larsen said.
It is the responsibility of Well Point and CareFirst to prove that the acquisition is in the public interest, Larsen said.
“Our analysis will show whether this acquisition will affect the accessibility and availability of health insurance in Maryland,” Larsen said.
Glenn Schneider, deputy director of Maryland Citizens’ Health Initiative, said he believes the commissioner already has all the evidence he needs.
“This sale in not in the public interest of the state of Maryland. CareFirst should be a nonprofit and should be reformed to better serve the public,” Schneider said.
The briefing came before the Senate Budget and Taxation, Senate Finance, House Appropriations and House Health and Government Operations Committees.
The last expert reports will be released Tuesday and the final round of hearings will be held at the end of this month. The record will be closed Feb. 5 and the commissioner will make his final decision, “hopefully” on Feb. 20. The General Assembly then may review the decision, and has the power to overturn or change it.