CareFirst's Largess to City Fails to Sway Council

Chief Executive Disputes Notion of Surplus

The president and chief executive of CareFirst BlueCross BlueShield defended the regional insurance giant as a "generous" benefactor to the community at a D.C. Council committee hearing yesterday, and a parade of nonprofit organizations backed up his claim.

But council members were unimpressed, appearing more resolute to charge ahead as the city wrangles with a lawsuit seeking $100 million from CareFirst for community health benefits.

Separately, the council has drafted legislation, the Medical Insurance Empowerment Act, to require CareFirst to meet the terms of its federal charter as a "charitable and benevolent" entity, a direct response to a decade-long criticism that CareFirst has been stockpiling its annual surpluses instead of using them to keep down premiums.

"CareFirst has been acting like a for-profit company," said council member Mary M. Cheh (D-Ward 3), chairman of the Committee on Public Services and Consumer Affairs and the legislation's sponsor. "It's an invitation for them to do the right thing."

Council member David A. Catania (I-At Large) offered more biting commentary throughout the hearing, often mentioning CareFirst's decision this year to pull out of an initial agreement to give $5 million to a health program and administer it. Catania had sponsored the "Healthy D.C." program and found other financing after restructuring it.

Under the proposed empowerment act, the mayor would have the authority to set a cap on CareFirst's surplus and establish the amount or revenue that the nonprofit company would give to the city for community health benefits. If CareFirst exceeded the range without good reason, it would be prohibited from raising premiums for a year.

CareFirst's new chief executive, Chet Burrell, who said he will mark his first anniversary at the company in about six weeks, said city officials are misinterpreting the charter and do not understand that CareFirst does not have a "surplus." It has, he said, "reserves" that must be preserved for capital improvements, paying claims and meeting legal requirements. The reserves equal less than $800 per member, according to CareFirst calculations. The company had a $754 million surplus last year.

Burrell also said CareFirst has given more than $100 million to at least 300 community groups in the past three years. People representing such groups as the local Girl Scouts and Boys and Girls Clubs testified about that help.

But other people offered a different view of CareFirst. Among them was a private citizen who said he was a policyholder whose exorbitant medical and prescription bills are not adequately covered.

Sharon Baskerville, chief executive of the D.C. Primary Care Association, said the legislation would provide steady resources for the city's neediest residents. The association, she said, received $1.5 million over three years. Nonprofit groups, however, compete for the money, and too much of the competition depends on lobbying expertise, she said.

The legislation has also sparked an aggressive lobbying effort by CareFirst. She said she had been called by former council member Kevin P. Chavous. Former council chairman Linda W. Cropp has also been making the rounds for the nonprofit group.

"It's the game, and health care should not be based on how well you play the game," Baskerville said.