Regulators, politicians and health-care executives made it clear yesterday that months of evaluation and public hearings lie ahead before CareFirst BlueCross BlueShield, the region's largest health insurer, is permitted to be acquired by a large California managed-care company.
Steven B. Larsen, Maryland's insurance commissioner -- who must approve the $ 1.3 billion deal with WellPoint Health Networks Inc. that was announced Tuesday -- said the state is hiring four experts to review different aspects of the agreement and to get an independent look at whether it's in the best interest of consumers. He has proposed that the three jurisdictions involved -- his office, Delaware and the District -- participate jointly in the review and hold regional public hearings.
The process is expected to take at least 18 months.
Some Maryland officials, where most of CareFirst's 3.1 million customers live, have already challenged the arrangement, which is contingent upon CareFirst converting from nonprofit status, because of the possible effect on coverage to low-income citizens in the state. The three affected governments expect to get more than $ 1 billion as part of the agreement, which could be used to supplement indigent health care.
"The first blush would have us jumping for joy over this potential for a windfall of humongous proportions," Maryland House Speaker Casper R. Taylor Jr. (D-Allegany) said yesterday. "But after you get underneath the surface of all this, you realize . . . that [acting] to capture a one-time payout, while disregarding all the other consequences, is an irresponsible approach. I want us to go into the process in a very sober, deliberate way."
Lawrence H. Mirel, the District's commissioner of insurance and securities, predicted the merger ultimately would be approved. "It's very hard to make a case for it not going forward," he said in an interview.
"I would not anticipate this would be bad for the consumers," he said. "I mean, I see no reason to be fearful. WellPoint's a good company. It has done good work around the country. There's no reason to think this should result in any lesser quality of care."
Mirel said the merger "should result in slowing down" premium-rate increases because a larger WellPoint is likely to save money by centralizing operations.
"The only possible hitches are that at some point politics will get to play a part in this," he said. "I can conceive of a situation, although I'm not predicting it, where all the [insurance] commissioners would agree and then some state legislator or attorney general would say: 'Well, that's not right! I'm not going to let you do that.' "
Several Maryland legislators said yesterday that there has been growing skepticism about the conversion idea, as powerful interests -- including Johns Hopkins University, the University of Maryland, the Maryland Hospital Association (MHA) and MedChi, a state medical society that represents Maryland's doctors -- all have signaled their initial opposition.
"We seriously doubt whether this plan is in the best interest of the business community, health-care providers and broader public," said Cal Pierson, president of the MHA, which represents all 58 hospitals operating in the state.
CareFirst and WellPoint executives told Wall Street analysts in a conference call that the conversion would benefit new and existing CareFirst members.
"Over time . . . the rate of increase in [CareFirst's] administrative costs will go down, and that will be translated into a slightly lower rate in increase in terms of premiums," said Leonard D. Schaeffer, WellPoint's chief executive.
"You know, higher volume hopefully will give us a slightly better shot at negotiating with physicians and hospitals for better rates," Schaeffer said. "And by virtue of being a larger company, we should have lower administrative costs."
In Maryland, lawmakers began contemplating the possible conversion earlier this year. In April, they passed a measure that eased the process for CareFirst by eliminating a law requiring the carrier to get approval from two-thirds of its members before proceeding with a conversion.
The legislature also passed a measure that would park the proceeds of a conversion -- an amount that could approach $ 1 billion in Maryland alone -- in a fund until lawmakers can agree how it would be spent.
Several have expressed keen interest in that money.
Sen. Thomas L. Bromwell (D) said he would like to see at least some of the money returned to his Baltimore district, where CareFirst's offices are based and where the company has benefited from local tax exemptions because of its charity status.
"A billion dollars coming at a time when the budget is the number one concern, it couldn't be a better time for them to step up," Bromwell said.
Gov. Parris N. Glendening (D) said through a spokesman that he, too, shares concerns about the fate of policyholders. "I want the Maryland insurance commissioner to look at this deal very carefully to ensure that . . . customers of CareFirst will receive quality care," Michael Morrill said, speaking for the governor.
A coalition of consumer groups in Maryland, Delaware and the District also has been formed to study the proposal, said Walter A. Smith Jr., executive director of DC Appleseed Center, a research and advocacy organization.
"You know, this is big, big money," Smith said. "Whatever happens here, the public is going to be significantly affected." |
