In D.C.'s Bid for Funds, CareFirst Chief Says Surplus Should Help Subscribers
Friday, September 11, 2009
Executives from CareFirst BlueCross BlueShield appeared Thursday before the District's insurance commission, which must determine whether the region's largest health-care insurer has to share a portion of its $687 million surplus with the city.
A ruling from the Department of Insurance, Securities and Banking could give the city's coffers a much-needed boost at a time when the District is struggling to balance its budget and provide health care to residents. The question is whether the surplus is "excessive" enough to warrant an allocation to the city.
Gennet Purcell, the acting DISB commissioner, announced Thursday that she would issue the commission's conclusion in writing Sept. 30 after reviewing testimony from the hearing and reports.
Chet Burrell, chief executive of CareFirst, testified that the insurer needs its surplus to pay potential claims and that a surplus should benefit the nonprofit organization's subscribers. He said the majority of subscribers in the area live in Maryland and Virginia, and that only 10 percent live in the District.
As commissioners questioned him, Burrell asked, "Is there an incentive to find excess to . . . get the money?"
Yes, according to Walter Smith, executive director of DC Appleseed Center, the advocacy group that has pushed city leaders to look closely at CareFirst's assets. "There is so much money at stake for the public," Smith said in an interview. "The need to try to provide affordable access to everyone is such an important goal."
Smith said CareFirst can afford to give away $300 million.
For years, Appleseed and others have accused CareFirst of hoarding its surpluses, and the insurer has fended them off. The battle between CareFirst and its critics stems from the 1939 federal charter that created the nonprofit organization as a "charitable and benevolent" group that was expected to benefit the community.
Although critics interpret the charter to mean sharing the wealth with D.C. residents, CareFirst says its obligation is to those who carry its insurance.
Last year, city leaders began to get tougher on CareFirst. The insurer pulled out of an initial agreement to administer and give $5 million to a health program, raising the ire of D.C. Council member David A. Catania (I-At Large). Attorney General Peter Nickles then filed a lawsuit on behalf of the city to get $100 million of CareFirst's surplus.
The suit was dropped after the D.C. Council approved legislation, the Medical Insurance Empowerment Amendment Act, that put the surplus issue under the purview of the insurance commission.
Burrell and CareFirst supporters were reluctant to put a figure on the surplus amount needed to keep the nonprofit entity financially stable. "The very word surplus seems to imply extra, unneeded or too much. Yet, in the insurance world, it is an essential requirement that represents amounts held for the protection of subscribers to assure that, come what may, their claims will be paid," Burrell said.
He said he has a saying, "When you need us most, we are most there for you."
But Cheryl Fish-Parcham of Families USA, a consumer health-care advocacy group, said in an interview that some subscribers are dissatisfied. "They've seen their premiums increased," she said.