The company that provides health insurance to 3.2 million people in the Washington region yesterday asked Maryland Gov. Robert L. Ehrlich Jr. to veto legislation that would force it to reorganize and submit to greater scrutiny.
CareFirst BlueCross BlueShield said that the legislation, which won overwhelming approval in the Maryland General Assembly, would have an extraordinarily adverse impact on the not-for-profit company's financial well-being and its subscribers.
The legislation was drafted after Maryland Insurance Commissioner Steven B. Larsen rejected a deal to sell the firm, saying the CareFirst board had shirked its fiduciary responsibility in striking a deal that undervalued the company and gave as much as to $ 119 million to a handful of key executives.
The legislation would prohibit the sale of the company for five years, oust 10 of the Maryland members of the 21-member board by December, restrict executive compensation packages and give regulators more authority to ensure that the heavily tax-subsidized company is true to its nonprofit mission.
Yesterday, Larsen and leading Maryland lawmakers said they were outraged over the last-minute lobbying campaign, saying that CareFirst was given ample opportunity to object to the bill during the 90-day legislative session but waited until after General Assembly adjourned last month.
In a letter to Ehrlich (R), CareFirst board Chairman Daniel Altobello reiterated a warning by the national BlueCross BlueShield Association that CareFirst could lose its right to operate as a "Blues" plan. If that happens, the company said, subscribers will lose "access to physicians and hospitals throughout the national Blues provider network," and 550,000 federal employees who receive insurance from CareFirst would be transferred to other companies.
That warning, also issued after the legislature adjourned, has led regulators in Delaware and the District to object to the bill, with D.C. Insurance Commissioner Lawrence H. Mirel issuing an order that forbids CareFirst to comply with the bill's provisions.
Ehrlich, in what he called an "unprecedented step," sent a letter Tuesday to Maryland's House speaker and Senate president seeking their input. "I am certain that everyone agrees" that losing the Blues trademark "would be nothing short of catastrophic," Ehrlich wrote in his letter. "The future of Maryland's dominant insurer is at risk."
"We're undecided" on a veto, Ehrlich said yesterday, adding that he will meet with legislative leaders on the matter.
"This is not about politics, this is not even about philosophical approach to an issue," Ehrlich said. "It's just about what's best for Maryland."
Company officials stand to lose financially under the proposed legislation, a point that was not mentioned in the entreaty to Ehrlich. Board officials such as Altobello, who was appointed to the CareFirst board by Ehrlich's chief fundraiser, would see their stipends dramatically slashed. Compensation packages given to such executives as CEO William Jews, who is Ehrlich's occasional golfing partner, would be regulated.
"To veto the bill, Governor Ehrlich would have to be as politically tone-deaf as CareFirst," said A.G. Newmyer III, chairman of a nonprofit, D.C.-based patient advocacy group called the Fair Care Foundation. "Does anyone really believe that the Blues system is going to give up 3.2 million customers?"
Lawmakers and Larsen also complained that the national association has yet to outline its specific problems with the bill, beyond a broad concern that the reorganization of the board could violate licensure provisions partly aimed at ensuring that such companies remain free from political influence.
If the association is willing to be more specific, bill supporter and House Speaker Michael E. Busch said yesterday, there will be time to address those concerns before it acts to yank the trademark.
"I can't imagine that BlueCross BlueShield wants to lose its market share in this region," Busch said. "In the meantime, we have the mandate of 188 legislators in the Senate and the House, the support of the Maryland citizens, you've got a company that can't prove that its decisions were in the best interest of the state, and a report that uncovered that the motivating factor of the proposed sale was the self-enrichment of the executives."
Iris Schaffer, a spokeswoman for the national association, said that it has been as clear as it can be about its problems with the proposed legislation. "This is a total takeover of a successful private company by the state and, in effect, you will have the state of Maryland running an insurance business."
Staff writer Lori Montgomery contributed to this report. |
