The proposed sale of CareFirst, the District's largest health insurer, to WellPoint, the big health insurer from California, could lead to higher premiums and reduced benefits for some people and could cause others to lose their insurance altogether. It also could mean the loss of community health-related activities that a nonprofit such as CareFirst is supposed to be performing.
CareFirst owns the Blue Cross-Blue Shield plans covering the District, Maryland, Northern Virginia and Delaware. It is supposed to provide affordable insurance to people who have difficulty obtaining coverage and be dedicated to community health concerns. The charter for the District's Blue Cross, for example, requires it to be run as a "charitable and benevolent" institution.
Instead of pursuing these obligations, however, CareFirst has been abandoning unprofitable forms of coverage and focusing on its balance sheet. In January, it filed for permission from area regulators to "convert" to for-profit status and sell itself for $ 1.3 billion to WellPoint.
Common sense suggests that our area would be better off having a local, nonprofit health insurer rather than an out-of-state corporation dedicated to earning profits. For example, CareFirst now spends a much higher percentage of premium dollars on payment for health care benefits (almost 90 percent) than does WellPoint (about 77 percent).
But CareFirst disputes this. In its filing with regulators, it claims that:
* It cannot remain viable as a nonprofit.
* The merger with WellPoint will benefit the public in terms of accessibility, availability and affordability of health insurance.
* The $ 1.3 billion selling price is fair and will make up for any harm caused by the conversion because that amount will be transferred to foundations committed to addressing area health concerns.
But the information CareFirst has submitted to regulators does not present hard evidence establishing its claims. For example, although WellPoint would be in charge after the merger, it has submitted almost no information concerning its specific intentions for premiums, products or coverage. The companies have said nothing about open enrollment or shown why CareFirst -- with more than twice the market share of its closest competitor, with reserves of more than $ 600 million and profits last year approaching $ 100 million -- will not be able to survive if it doesn't merge. And the companies have not explained why CareFirst could not have used its nearly $ 100 million profits from last year to lower premiums, increase benefits and provide coverage for those who otherwise could not afford it.
Moreover, the CareFirst officers promoting the merger have such a large economic stake in its approval that it is difficult to accept their arguments at face value. CareFirst senior officers were to be paid bonuses totaling $ 33 million for getting the deal approved. The Maryland legislature recently voted to eliminate these bonuses, but officers still will receive many millions in either higher compensation or severance if the deal is completed.
The D.C. regulators charged with making sure this proposal is in the public interest are the insurance commissioner and the corporation counsel. Before CareFirst filed for conversion in January, D.C. Insurance Commissioner Larry Mirel said, "It's very hard to make a case for it [the conversion] not going forward." Presumably he will give the issue more scrutiny than that statement suggests. Given the importance of the issue, he recently announced he will hire independent experts to assess it just as the commissioner in Maryland is doing.
Regulators should require a clear, factual demonstration that selling CareFirst to a for-profit company will benefit the public. Otherwise, they should not approve the deal.
-- Walter Smith
is executive director of DC Appleseed,
part of CareFirstWatch, a coalition
concerned about the proposed merger. |
