Maryland officials agreed yesterday to a scaled-back oversight plan for the region's largest health insurance company to allow CareFirst Inc. to keep its Blue Cross Blue Shield affiliation.
The deal ensures that CareFirst's 3.2 million members in Washington, Maryland, Northern Virginia and Delaware will have access to Blue Cross network doctors and hospitals outside the region. The Blue Cross and Blue Shield Association had stripped CareFirst of its license May 22 in a dispute over a new Maryland law, leading to two weeks of legal wrangling and tense negotiations among the state, the insurer and the association.
The settlement, signed by U.S. District Judge J. Frederick Motz in Baltimore, weakens some points of the law, which sought to give state officials more influence over how the not-for-profit insurer operates and pays its top executives.
The law was prompted, in part, by Maryland officials' concerns that the CareFirst board had authorized illegal bonuses and other incentives to company executives as part of CareFirst's plan to convert to a for-profit organization and merge with California-based WellPoint Health Networks Inc. for $ 1.3 billion.
"The law is being changed a bit, but this agreement should relieve CareFirst's 3.2 million policyholders of any anxiety of whether they can continue being covered in the national network," said Maryland Attorney General J. Joseph Curran Jr. "Now they can go outside the area, to Florida or Arizona for a vacation or retirement, and know they are still covered."
Curran described the agreement as a compromise that may have averted litigation by CareFirst challenging the constitutionality of the Maryland law. Such litigation could have jeopardized the continued coverage of many CareFirst members, he said.
CareFirst lawyers agreed in court yesterday not to challenge the agreement.
Under the agreement, a Maryland state committee will make five appointments to CareFirst's 21-member corporate board, compared with 10 under the law, which Gov. Robert L. Ehrlich Jr. (R) signed May 22. Those five members will be appointed by Jan. 1.
Then, by July 1, 2004, seven more board members will be named -- this time, by the CareFirst board -- from a pool of applicants certified by the state committee.
The agreement gives Maryland's insurance commissioner the right to challenge new executive-compensation guidelines drawn up by CareFirst. Under the law, the commissioner could have regulated the compensation.
Maryland's new insurance commissioner, Del. Alfred W. Redmer Jr. (R-Baltimore County), said yesterday's agreement "tweaked" but did not substantially change the law. "When you look at what the legislature tried to accomplish and the settlement approved today, all of the legislative objectives have been met."
D.C. insurance commissioner Lawrence H. Mirel had objected to the Maryland law, saying it gave the state influence over CareFirst's two District-based health plans. But Mirel gave CareFirst permission yesterday to agree to the court-ordered deal.
The original reform bill, passed in April, gave the state broad oversight powers over CareFirst and barred it from converting to a for-profit company for five years -- a provision that remains in effect and was not affected by yesterday's court order, state officials said.
Staff writer Craig Whitlock contributed to this report. |
