April 6, 2006
The Washington Post
Susan Levine
 
Mayor Anthony A. Williams intends to end a special tax break for CareFirst BlueCross BlueShield's District affiliate in fiscal 2007 and to divert the more than $5 million from it to health-care coverage for low-income residents.

Following through on concerns that the affiliate, Group Hospitalization and Medical Services Inc., was not upholding its congressional charter as a "charitable and benevolent institution," Williams has included the action in budget legislation before the D.C. Council. It would establish a separate enterprise fund to assist residents with incomes up to 400 percent of federal poverty levels and expand benefits provided through Medicaid and the DC HealthCare Alliance program.

"We can help a lot more low-income people," said the mayor's senior policy adviser, Gina Lagomarsino.

Williams would close a program funded by CareFirst that is intended to provide affordable insurance to residents with preexisting medical conditions -- although those already enrolled could continue to be covered -- and would bring the company's current 1 percent tax on gross premiums in line with the 1.7 percent the city's other insurers pay.

The differential has equated to millions of dollars since the late 1990s but has benefited only several hundred people. Critics say CareFirst has done far too little in publicizing and promoting the program's existence; company officials have acknowledged its problems even while defending the company's overall record.

The administration's move is much more palatable to Group Hospitalization and Medical Services than a parallel bill that council member Jim Graham (D-Ward 1) is drafting to require it to set aside a certain percentage of its gross premiums for public health needs.

"We accept that we should be on a level playing field," CareFirst spokesman Jeff Valentine said, referring to the mayor's approach and the company's cooperation. "At the same time," he added, turning to the extra obligation that Graham would mandate, "we should be on a level field with the commercial carriers."

Graham originally was pushing for the mayor's office to review the company's reserves annually and even intervene if officials did not agree to distribute excessive reserves to benefit subscribers or public health programs. His new proposal, which has yet to receive council scrutiny, is modeled on Pennsylvania law governing a BlueCross BlueShield company in that state.

"My hope is to have some requirement that better serves the public interest in terms of this company's responsibility," he said.

CareFirst's $1 billion affiliate, which has more than 1.2 million subscribers in the city, Montgomery and Prince George's counties and Northern Virginia, has been under scrutiny since a legal and economic analysis in late 2004 concluded that it fell far short of its civic obligation.

The report by the D.C. Appleseed Center for Law and Justice, a nonprofit public policy organization, triggered hearings by a council committee and the city insurance commissioner. All three called on the company to commit far more funds to charitable activities, something CareFirst officials say they have done through a multimillion-dollar plan to slow the rate of premium increases to members and to support initiatives to improve patient safety, physician quality and minority health outcomes.

Spending on those initiatives and contributions to community groups and projects rose from $8.7 million in 2005 to $9.4 million this year, Valentine said, with the 2007 amount expected to exceed $10 million.

"All of these things are forward progress," Appleseed Executive Director Walter Smith said. He supports the mayor's measure but believes Graham's bill should be passed as well. The model in Pennsylvania will make it more difficult to oppose, he predicted.

"The precedent does help to demonstrate the reasonableness of what's going on here," he said.