ANNAPOLIS – CareFirst BlueCross BlueShield’s proposed conversion to a for- profit entity faced some of its toughest opposition yet as a flurry of bills aimed at the health insurer were heard by a House panel Thursday.
The six bills heard by the House Economic Matters Committee ranged from limiting the salaries of CareFirst’s board and executives, to pushing the health insurer to participate in programs from which it has been withdrawing over the past few years.
Many speakers at the hearing questioned the motives behind CareFirst’s proposed conversion and sale to Wellpoint Health Networks Inc. Wellpoint, based in California, has offered $1.3 billion to acquire CareFirst.
The lonely opponent of the bills was Fran Doherty, vice president of government affairs for CareFirst, who spent her birthday defending the sale.
The package of bills undermines the authority of Insurance Commissioner Steve Larsen, who is charged by law with determining Maryland’s public interest in the sale, Doherty said. Lawmakers may not have all of the information necessary to make fair judgments on the conversion, she said.
Larsen must approve the conversion and subsequent sale before it may take place. A decision is not expected for at least another 15 months.
Under two separate bills introduced by Delegate Dana Lee Dembrow, D- Montgomery, and Delegate Van Mitchell, D-Charles, the salaries of CareFirst executives and board members would come under state regulation.
Dembrow’s bill would give control of the nonprofit health insurer’s board of directors and officers’ compensation to the Insurance Commissioner. Mitchell’s bill caps compensation for board members at $24,000 and for the chairman at $40,000.
In 2000, the board chairman was paid almost $72,000 with the average compensation of the other 23 board members at $35,920.
“My purpose for putting (the bill) on the board was because a lot of people were asking questions,” Mitchell said. “Their salaries have been rising steadily since 1998. . . . I just wanted to bring a bill to start a dialogue.”
Dembrow’s bill specifically aims at CareFirst’s executives and president, who made more than $2 million in 2000, an amount Dembrow has called “obscene.”
“My contention is to include in the pot the reasonableness of their salaries,” he said. “We need a company that is truly a nonprofit and is committed to public service, without them paying themselves excessive salaries.”
Suspicions that CareFirst executives’ motives for pushing the sale were solely financial, prompted Delegate Dan Morhaim, D-Baltimore County, to sponsor a bill to prohibit directors, officers or trustees of the company from profiting if a sale takes place.
“If (CareFirst executives) are acting in the public trust, let’s remove that cloud from over their heads,” Morhaim said.
Because CareFirst is a publicly held trust, Morhaim said, its sale would “be like the chancellor of the University of Maryland selling a part of College Park to the University of North Carolina for $30 million and then pocketing $10 million.”
Delegate Michael Busch’s bill would require Wellpoint or any other potential buyer to pay entirely with cash and not company stock. Busch, D-Anne Arundel, is chairman of the Economic Matters Committee.
Having the state own shares of a privately owned CareFirst could cause a conflict of interest, he said.
“The state would be in the perverse position where we would profit at the expense of increased premiums to businesses and people of Maryland,” he said.
The legislation even drew the support of CareFirst competitor MAMSI, which surprised some lawmakers and audience members.
“We don’t believe (the state) should own stock,” said D. Robert Enten, MAMSI lobbyist. “We think it’s a conflict of interest.”
Another Busch bill would push CareFirst back toward its generally perceived role as the insurer of last resort, requiring that a health insurer meet certain notification and coverage requirements before dropping a participant from a plan.
“This bill addresses the situation when a carrier withdraws,” Larsen said. “This bill goes to the heart of the issue.”
Delegate Shane Pendergrass, D-Howard, took a different approach toward the same goal. Her bill would require CareFirst to participate in the Medicaid program to receive its 2 percent premium tax exemption.
Currently, they receive tax exemptions solely because they are nonprofit.
“I think what you heard today is that they should be serving the public good,” she said, “and should be getting their benefits from that. It’s not clear that they’re doing that. If we’re subsidizing them, we expect something for Maryland citizens.”