CareFirst's D.C. affiliate clarifies charity role

Is a Blue Cross plan a charity or a business? CareFirst BlueCross BlueShield's affiliate in Washington, D.C., told an insurance commissioner in March that it's a bit of both, but that its main job is to vie against its rivals and not to dole out so much money to the public that it would create a hardship on members.

Such pronouncements came at an awkward time for CareFirst, which during the previous few months had been announcing new commitments to nonprofit health programs for residents of Maryland, the District of Columbia and northern Virginia. The Owings Mills, Md.-based insurer said in February that it was rededicating itself to a nonprofit mission after having tried and failed to get Maryland's permission to convert to a for-profit, shareholder-owned company two years ago.

"We are a nonprofit, but we're not a 'charity.' We are not a 'health United Way,' if you will. We compete in a very competitive marketplace," said Jeff Valentine, company spokesman.

At a hearing convened by D.C. Insurance Commissioner Lawrence H. Mirel, CareFirst executives were questioned at length on the role and responsibilities of Group Hospitalization and Medical Services Inc., the company's D.C. affiliate. That segment operates under a federal charter, granted by Congress in 1939, that categorizes the health plan as a "charitable and benevolent institution." The charter does not spell out how the company should achieve that goal.

The hearing was prompted by a recent report from the DC Appleseed Center for Law and Justice, a public interest group, which called for GHMSI to pay to area charities 2% to 3% of its annual revenues from premiums, which would be about $41 million to $61 million at present. The report said that high levels of reserves amassed by GHMSI -- which now stand at about $500 million -- mean the company can spend more on coverage for the uninsured and on other health care initiatives.

CareFirst executives told Mirel that, according to the letter of the law, they did not have to give any more money to charity than a for-profit competitor would.

Mirel said in an interview he was impressed by the amount of information that CareFirst presented at the hearing to defend its position. The request by the Appleseed group to tap the plan's premium revenues seems to be based on "a misunderstanding of what [GHMSI]" is, he said. It was "unlikely" he would exercise his authority to order the company to spend more on charity, and it is probably best for the health plan's own board to make decisions about how much to spend on its community, Mirel said.

CareFirst announced earlier this year, after the release of the Appleseed report, that it planned to spend $92 million over the next few years on long-term community health programs, quality incentive programs for physicians, and safety promotion.

The Medical Society of the District of Columbia believes that those initiatives are good, but that the plan can easily spare a lot more money to help the public, said internist Victor Freeman, MD, the society's president.

The plan should reduce its profits and reserves and spend more money on primary care clinics, wellness programs, health promotion and school health programs, and should introduce products for Medicare and Medicaid patients, he said. A decision by Mirel not to require further commitments by GHMSI, he said, would be "disappointing."