CareFirst reforms not crossing to Delaware

Maryland-based CareFirst BlueCross BlueShield has found itself caught in a bureaucratic tug-of-war because of efforts by a state insurance regulator to sever the official connection of the company's Delaware affiliate from its parent.

Delaware Insurance Commissioner Donna Lee Williams on June 30 issued an order mandating that Owings Mills, Md.-based CareFirst end its "structural affiliation" with BlueCross BlueShield of Delaware. Under the order, the Delaware plan would get its own license back as an independent member of the Chicago-based Blue Cross and Blue Shield Assn. and would be governed solely by its own, separate board of directors. The order also would give Williams complete authority over regulating the Delaware plan.

Williams said she made her decision because she was concerned that corporate reforms imposed on CareFirst Inc. by the Maryland Legislature in 2003 could work to the detriment of members in Delaware by inhibiting the company's growth. She also indicated she was unhappy with how CareFirst's board members were being chosen, arguing that some newcomers nominated by Maryland officials as part of that state's reform process were "unfamiliar" to the Blue Cross operation in her state.

The dispute between the two commissioners can be traced to the attempted conversion by CareFirst to a for-profit, shareholder-owned company last year. That application was denied by the Maryland insurance commissioner at the time, Steve B. Larsen, who accused CareFirst board members and executives of trying to profit from a planned sale to California-based WellPoint Health Networks. The Maryland General Assembly granted the state the authority to replace many of CareFirst's board members and imposed other oversight measures.

The decision by Williams drew harsh words from Maryland Insurance Commissioner Alfred W. Redmer Jr., who issued a statement in July saying he was displeased that Williams issued her order without consulting him first. Executives at CareFirst are unsure if Williams' order is final and are awaiting a definitive statement from Redmer.