A study of the region's largest health insurance provider concludes that CareFirst BlueCross BlueShield is shirking its mission and legal obligation to support local public health needs, spending a tiny fraction of the at least $40 million it should commit annually.
The study, to be released today by the DC Appleseed Center for Law and Justice, faults the nonprofit CareFirst for directing less than $1.5 million through its District-based affiliate this year to community activities.
Given the affiliate's billion-dollar worth and its federal charter as a "charitable and benevolent institution," this year's contribution "could and should" have been between $40 million and $61 million, according to the center. Neither the company's competitive position nor financial stability would be endangered by the calculation, the report says.
"The company is falling far short of its obligation and is missing huge opportunities to address health care needs in this community," the study says. Local leaders suggest such counter efforts as a regional campaign on diet, exercise and smoking; a comprehensive initiative on mental health problems; and expansion of low-cost health insurance offerings.
The call for significant change, through regulatory oversight if necessary, already is drawing support from key city officials.
"I agree with the basic conclusion," D.C. Insurance Commissioner Lawrence H. Mirel said. "I do not know if the amount Appleseed is talking about is realistic . . . [but] I think they should do more."
D.C. Council member Sharon Ambrose (D-Ward 6), who chairs the Consumer and Regulatory Affairs Committee, would like Mirel and the council to hold hearings on the issues the report raises. "On its face, if you start looking at the numbers, there is a discrepancy between what you'd expect an organization with those revenues to do and what they're setting aside," she said.
CareFirst's president and chief executive, William L. Jews, said in a statement that his company wants "to play a role" in addressing community health problems but noted that the firm's first responsibility must be to policyholders, "being there for them when we are most needed."
The 129-page legal and economic analysis stems from the insurance company's unsuccessful attempt last year to convert from its nonprofit status into a for-profit corporation. DC Appleseed, an advocacy organization that focuses on systemic local problems, organized a coalition of providers and consumers to assess whether such a change would help or harm health care.
When the Maryland insurance commissioner rejected CareFirst's application -- deciding that the proposed sale price significantly undervalued the company and would hurt the public interest -- Appleseed used his denial as a jumping-off point for evaluating whether the nonprofit was living up to its charitable mission.
The center focused on Group Hospitalization and Medical Services Inc., the CareFirst entity that serves about 1 million subscribers in the District, Northern Virginia and Montgomery and Prince George's counties. Group Hospitalization and Medical Services is the largest and most valuable of CareFirst's three affiliates, which include Maryland and Delaware segments, and it is the only one with a congressional charter.
That charter, according to the study, is legally binding and enforceable in concrete ways: Group Hospitalization "must use its revenues and surplus to perform charitable activities to the maximum feasible extent, consistent with its need to remain viable and competitive."
Yet the study says that the District-based affiliate amasses reserves that are well beyond levels required by regulators and that it commits a far smaller percentage of premiums to community benefits compared with other nonprofits. Those companies typically devote between 1.25 percent and 3 percent of premium revenue to such programs, while CareFirst's contribution is a fraction of 1 percent.
"It's really quite startling how much more they should be doing," Walter Smith, executive director at Appleseed, said last week. "They need to take a quantum leap forward."
The study's bottom line comes as no surprise to CareFirst. DC Appleseed repeatedly consulted with top officials, even vetting the final draft because, as Smith put it, "we're not interested in playing gotcha."
In his statement, Jews said CareFirst and Group Hospitalization are "supportive of efforts to solve the many health care challenges facing greater Washington." But he cautioned against doing anything that might jeopardize their ability to cover medical claims.
His statement referred to a nearly completed strategy covering all areas of the company's business. A spokesman elaborated, explaining that one component would be a "mission fulfillment plan" addressing ways CareFirst might further benefit the community on health issues.
Spokesman Jeffery Valentine identified some of Group Hospitalization's charitable contributions this year as $240,000 in grants to address childhood and adult obesity; $420,000 toward a public health care expo; $100,000 in support of a women's home health initiative; and $100,000 to help the Whitman-Walker Clinic buy two mobile-lab vans for HIV/AIDS testing.
Valentine also mentioned CareFirst's support of the District's Rate Stabilization Fund, for residents who have trouble finding affordable health insurance, and Maryland's Senior Prescription Drug Plan, which assists elderly people with drug costs. Appleseed, however, said those programs are specifically required by statute to offset the tax breaks the company receives with its nonprofit status.
The evaluation of Group Hospitalization's requirement as a federally chartered nonprofit -- which was done pro bono by the Washington law firm of Covington & Burling -- specifies that the District's insurance commissioner and attorney general have the duty of enforcing this obligation. City Administrator Robert C. Bobb already has asked the attorney general's office to review the legal analysis, said his senior health adviser, Gina Lagomarsino.
Mathematica Policy Research of Washington calculated the study's economic numbers. Its assessment of an expanded community role for Group Hospitalization came from interviews with a range of local health leaders, who also offered ideas on children's health, outreach to immigrant populations and emergency preparedness.
Last year, CareFirst reported revenue of nearly $7.3 billion, more than $1 billion in reserves and a surplus of more than $171 million. Its compensation of top executives, a contentious point during hearings on its possible conversion to for-profit status, remains an issue. Although the spokesman declined to release Jews's compensation for last year, the chief executive earned $2.8 million in salary and bonuses in 2002.
Mirel, the insurance commissioner, hopes that the company will respond in "an open way" to the Appleseed study. "This report is designed to put pressure on them," he said, "and I think it will have that effect." |
