City Insurance Commissioner Concludes Firm's Giving Satisfies Legal Obligation
By Susan Levine
Washington Post Staff Writer
Tuesday, May 17, 2005
The District-based affiliate of CareFirst BlueCross BlueShield is meeting its basic legal obligation as a charitable nonprofit but has a greater civic responsibility and "can and should do more" to promote community health, the D.C. insurance commissioner stated in a report released yesterday.
Commissioner Lawrence H. Mirel concluded that, as a $1 billion company, Group Hospitalization and Medical Services Inc. should be "engaging in charitable activity significantly beyond its current activities." He pointed to capital reserves well in excess of industry standards and said GHMSI could commit additional money without endangering its financial viability.
Mirel declined to mandate or suggest levels of funding or beneficiaries. He instead gave the company's trustees a Sept. 1 deadline for a detailed, location-specific breakdown of its charitable spending since 2004. Though couched as a request, the commissioner said yesterday that he expected an appropriate response from officials.
"I think they've gotten the message from just the public exposure," he said.
That exposure stems from a 129-page legal and economic analysis by the DC Appleseed Center for Law and Justice, which in December faulted CareFirst and its affiliate for paltry charitable spending. The advocacy organization maintained that the affiliate's 1939 congressional charter as a "charitable and benevolent institution" required it to allocate at least $40 million annually to local public health needs.
Mirel disagreed with Appleseed's calculation and concurred with the company's view that it met its legal duty under the charter by selling insurance to its 1.24 million subscribers in the city, Montgomery and Prince George's counties and Northern Virginia.
Yet he identified a separate and broader social burden the company has -- one that compels it "to engage in charitable activities beyond GHMSI's primary mission of providing health insurance," he wrote.
A spokesman for CareFirst said yesterday that it was pleased by the commissioner's report. He reaffirmed "that GHMSI's core obligation under our federal charter is to our members" and that any charitable spending "ultimately is a decision that should be made by the board of trustees," noted spokesman Jeffery Valentine.
CareFirst's board has expanded its community health effort this year through a $92 million "CareFirst Commitment" program. Two-thirds of that will be used to slow the rate of premium hikes; an additional $8.7 million will be directed to initiatives to improve physician quality, patient safety and health in minority communities.
The insurer has faced public pressure since its failed attempt in 2003 to convert to a for-profit. Maryland took the lead, with legislators forcing changes to the board of trustees, restricting executive compensation and forbidding another conversion attempt for five years. The Appleseed study followed, focusing on the largest and most valuable of CareFirst's three entities, and then a hearing by Mirel in March.
Mirel's middle ground resolves little, according to Walter Smith, Appleseed executive director. "He just wants to use a bully pulpit," Smith responded yesterday. "He's talking about social and moral responsibility. I think it's much better that there be a clearly defined legal responsibility and that there be tools available and oversight available to enforce that responsibility."
The assessments by Appleseed and Mirel have convinced D.C. Council member Jim Graham (D-Ward 1) that the District-based affiliate is "a very well-funded corporation" that can afford to contribute much more to public needs. "The question is: In what way?" Graham said. He said he's waiting for a meeting this month with CareFirst officials to decide whether the Consumer and Regulatory Affairs Committee, which he chairs, should take up the matter.
Gina Lagomarsino, senior health policy adviser to City Administrator Robert C. Bobb, said Bobb and D.C. Attorney General Robert J. Spagnoletti will look closely at any legislative proposal to mandate greater philanthropy by the insurer.
"We're definitely going to be evaluating it," Lagomarsino said. "And we'll definitely be watching CareFirst to see how it's conducting itself as a corporate citizen."
Its role in the community, she said, "is a very important policy issue."