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CareFirst: Too Big to Regulate?

CareFirst Blue Cross Blue Shield (CareFirst) and the District’s Department of Insurance Securities and Banking (DISB) are engaged in what is the most poorly choreographed pursuit of an escaping criminal by officers of the law in the annals of health insurance in the District. On December 30, 2014, Acting Insurance Commissioner, Chester McPherson, “threw the book” at CareFirst when he ordered the company to submit a plan implementing a “fair and equitable” distribution of CareFirst’s excessive reserves as reinvestment in community health in the District of Columbia.

Applying the Medical Insurance Empowerment Amendment Act of 2008 (MIEAA) as was intended when passed by DC Council, the Commissioner found that of CareFirst’s $964 million in reserves at the end of 2011, $268 million were excessive, including $56 million attributable to the District. The determination of the excessive reserves and their dollar amount was the product of an almost year-long clash of combative actuaries, lawyers, and accountants. CareFirst was well-represented in the process as was DISB.

March 16, 2015 was set by the Commissioner as CareFirst’s deadline to submit its distribution plan for approval. Instead of submitting a plan as ordered, CareFirst puffed itself up beyond recognition and lectured DISB with arguments already offered repeatedly and rejected as often without qualification. CareFirst continues to disregard its obligations to community health.

CareFirst’s defiance of DISB has included lobbying the insurance departments of Maryland and Virginia to prohibit the distribution. Moreover, the insurer has attempted to persuade members of Congress to repeal its 1939 congressional charter that mandates Group Hospitalization Medical Services, Inc. (GHMSI), CareFirst’s affiliate in the District, to act as a “charitable and benevolent” institution under the exclusive regulatory authority of the District of Columbia.

The “Keystone Cops” chase was on. Instead of supporting DISB in the lawful enforcement of the statute, Mayor Bowser removed Commissioner McPherson from his post and installed a new Commissioner who has yet to suggest a timeframe for apprehension of the miscreants.

What’s going on here in The District of Columbia? We’ve seen how Huron was able to land a contract at the United Medical Center with a $12.7 million bid. They were awarded the contract, even though: (1) their bid was two weeks late; (2) they bid and were awarded $2.7 million over the published $10 million contract limit; and (3) they had no DBE as required by law!

More recently, we’ve seen how Exelon was able to “make a deal” with the Mayor for a $78 million sweetener in its $7 billion Pepco deal. Yet, responding rate-payers, by an over 80% majority, expressed their opposition to Exelon’s purchase of Pepco. CareFirst, a $7 billion corporation, is wielding the self-serving influence on local government that we’ve come to expect from large corporations. It refuses to distribute $56 million in community health investments. Too big to regulate.

When it comes to respect for and enforcement of DC law, shouldn’t it matter that former DC Council Chair, Linda Cropp, is the now the Chair of CareFirst’s Board of Directors? Or that at-large Councilmember David Grosso was a CareFirst employee until just two short years ago? Maybe it should matter that CareFirst’s new office tower at 840 First Street, NE was built with tax-exempt construction materials — a gift of DC taxpayers. Maybe not.

MIEAA permits DISB to: (1) order CareFirst to distribute the excessive reserves attributable to the District without delay; (2) deny CareFirst’s rate increases on its plans in 2016 and after until it complies; and (3) explore additional penalties against the company and its officers.

Mayor Bowser needs to hear from us. Expressions of concern, embarrassment, anger, disgust are all appropriate. After all, as a non-profit, public trust, CareFirst is owned by the residents of the District, not its policyholders, who are merely the overcharged customers who’ve made the excessive reserves possible. Another way to express your opposition is to join in the petition being circulated by the Campaign to Curb CareFirst.

[submitted by Samuel Jordan*]

*Samuel Jordan, a 58-year resident of Ward 7, is Executive Director of Health Care Now, a long-term community health advocacy organization. He has also served as Chair of the Board of Directors of the United Medical Center Foundation; Project Manager of the Chronic Care Initiative, which distributed $5.6 million to health services providers in DC to develop interventions for chronic illnesses, particularly in medically underserved communities; Project Investigator for the Navigator project of the DC Cancer Consortium for breast cancer patients at the United Medical Center and the communities it serves.

Copyright © 2015 InTowner Publishing Corp. & Samuel Jordan/Health Care Now. All rights reserved.