Business
CareFirst reserves under scrutiny by D.C. insurance regulator
■ A new law allows the district to order the company to spend excess funds on public health. The insurer says reserves should benefit plan members.
By Emily Berry — Posted Sept. 29, 2009
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The insurance commissioner of Washington, D.C., is expected to rule by the end of September whether CareFirst BlueCross BlueShield is carrying too high a surplus and should have to spend some of its money on health programs in the district.
The district's insurance department held a hearing Sept. 10 over the issue, during which CareFirst CEO Chet Burrell argued that the reserves are not too large. He said even if they were, the excess should not be used to benefit the general public.
The hearing was called for under a law the Council of the District of Columbia passed in 2008 requiring the commissioner to evaluate annually the reserves held by CareFirst's local subsidiary, Group Hospitalization and Medical Services Inc. The law allows the commissioner to order the company to spend some of the money on "community health reinvestment" if the surplus is too large.
GHMSI reported reserves of $686.8 million at the end of 2008. Consulting firms hired by CareFirst have found that the company's current reserves are within an "optimal" range.
Under the new law, reserves would be deemed "excessive" if they exceed both minimum thresholds set by the National Assn. of Insurance Commissioners and the BlueCross BlueShield Assn., and if the portion of the reserves attributable to the district are "unreasonably large" in the judgment of the insurance commissioner.
Meanwhile, Maryland Insurance Commissioner Ralph Tyler has hired accounting firm Invotex to determine if CareFirst is keeping too much money in reserve. He has said he expects the firm to issue its report around late October.
