Maryland insurance commissioner seeks audit of CareFirst reserves

By the most recent estimate, the Mid-Atlantic Blues plan had nearly $1.7 billion in surplus set aside. An audit would examine whether the amount is reasonable.

By Emily Berry — Posted Jan. 5, 2009

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Physicians, health care advocates and government officials in Maryland and Washington, D.C., have long questioned the level of CareFirst BlueCross BlueShield's reserves.

Now Maryland's insurance commissioner will try to get an independent ruling on whether the plan's rainy day fund is more than is necessary for a rainy day.

Commissioner Ralph Tyler in December 2008 said his office would issue a request for proposals soliciting an audit of the reserves and hoped to have someone working on the project in early 2009. There is no word on when the audit would be complete.

"I just think it's the right thing to do," Tyler said.

Officials with CareFirst, based in Owings Mills, Md., have defended their recent rate increases even as the company keeps millions of dollars aside. According to its most recent filing with the National Assn. of Insurance Commissioners, the company had nearly $1.7 billion in reserve.

Despite that cushion, the insurer has lowered some physician reimbursements for 2009, state officials said.

In the face of criticism and a lawsuit brought by Washington, D.C., over its reserve level, the company's executives said that in turbulent economic times, it's even more critical that it be able to operate without risking insolvency in the face of crisis.

In response to Tyler's planned audit, company spokesman Jeff Valentine said "the [Maryland Insurance Administration] has the authority to review CareFirst's reserves, and naturally we'll cooperate with that review."

Tyler said he realizes the company does need to have an adequate surplus.

"It's a case of finding the balance, and in the case of CareFirst, a nonprofit health plan, what you want is to make sure the rates charged to the customer are appropriate, and you want to make certain the surplus is adequate, because the ultimate consumer protection is solvency."

In a ruling made in 2008, Tyler cut former CareFirst CEO William Jews' severance package in half from $18 million to $9 million, citing in part the company's failure to live up to its charitable mission during the time Jews was leading CareFirst.

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