Nine Public Interest Review Criteria Proposed:

Consumer Groups from Four Jurisdictions Call on Regulators to Protect The Public Interest In CareFirst Conversion

A statement by the Coalition for Health Care Accountability
Maryland Blue Cross Blue Shield was founded in 1937 by Maryland’s charitable hospitals to enable people to “subscribe” to a hospital care insurance plan. Patients’ ability to pay through the plan, in turn, buttressed hospital solvency.

In an open letter to the Insurance Commissioners, Attorneys General and Corporation Counsel in Maryland, Delaware, Washington D.C., and Virginia, consumer coalitions based in those jurisdictions have urged their regulators to make “the public interest” the central focus of their regulatory review in the proposed for-profit conversion of CareFirst. CareFirst is a nonprofit holding company that controls the Blue Cross Blue Shield plans in the three states, Maryland, Delaware and the District of Columbia. The groups called on officials to carefully assess what impact the transaction might have on continued access to health services for residents of the four jurisdictions. [See companion article in this issue about The Abell Foundation’s study of the privatization proposal, in which Blue Cross Blue Shield refused to participate.--Ed.]

Walter Smith from the D.C. coalition explains that “the public is aware that there is much at stake for them whether they are insured, uninsured or subscribers and want their regulators to understand the issues from the community perspective. What regulators need to be asking is, ‘Is this transaction in the public interest? How will the public be served if this insurer becomes a for-profit corporation, focused primarily on the needs of its stockholders?”

In a move that had long been anticipated, the company announced just before Thanksgiving that it would seek regulatory approval to convert to for-profit status. CareFirst is expected to formally file for the change in corporate status in a matter of days, if it has not already done so as this goes to press.

Because this is a multi-state conversion of a single company, the consumer groups also urged regulators to work together and coordinate their reviews by sharing information and expertise.
Dr. Schramm will discuss the proposed Blue Cross-Blue Shield privatization on Maryland Public Television’s “Jeff Salkin Show” at 7:30 p.m. on Tues., Jan. 8. The show will be rebroadcast at 11:30 p.m. the same night.

“The insured and uninsured in each jurisdiction will be affected by what steps regulators take in the three other jurisdictions,” said Hal Wallach of the Maryland coalition. “You simply can’t assess the true impact of this deal without looking at the overall picture. We are very concerned about the health impact specifically for the most vulnerable in each jurisdiction, especially in these times of economic uncertainty.”

The nonprofit health insurance company is the largest insurer in the four-jurisdiction area. The community coalitions came together as an outgrowth of substantial public concerns about the effect the conversion could have on continued access to health services.

“Another priority for the states is ensuring that, if this conversion is allowed to go forward, the full fair market value of CareFirst is protected for the community,” stated Joann Hasse of the Delaware coalition. “These assets belong to the public and should be used to meet the health care needs of the residents of those states.”

The consumer groups set forth nine public interest criteria that they believe should govern review of the CareFirst deal:

  1. Ensure that the conversion will maintain or improve access to quality, affordable health care in each of the jurisdictions.

  2. Conduct a health impact study to understand the significant effect on the insured and the uninsured in each jurisdiction as well as the impact on the health insurance markets

  3. Conduct a fair and open process that includes significant public participation including public review of conversion documents and well-publicized public hearings.

  4. Contract with a truly independent expert to conduct an accurate valuation of CareFirst.

  5. Implement a mechanism for continued monitoring by the relevant state agencies of the new for-profit to ensure that it meets its obligations to the community.

  6. Thoroughly investigate to make sure that no CareFirst officers privately benefit from the conversion.

  7. Ensure that the Boards of Directors upheld their fiduciary duties in considering this transaction and determined without question that it is in the public interest.

  8. Protect the full value of CareFirst in foundations with missions dedicating these assets exclusively to health care access for the residents of each of the four jurisdictions.

  9. Insist on local control and accountability of each of the Blue Cross Blue Shield plans following a conversion.

The coalitions have been working with Community Catalyst based in Boston, which monitors nonprofit conversions of Blue Cross Blue Shield plans and hospitals across the country and offers support to community groups. “This proposed conversion will have an enormous impact on the communities in four jurisdictions and it is essential that those communities have a seat at the table throughout the process” said Nomita Ganguly, Staff Attorney for Community Catalyst.


National Capital Area CareFirst Watch, (D.C) Walter Smith – (202) 393-1158 (VA) George Barker – (703) 573-3100

Coalition for Health Care Accountability (Maryland) Hal Wallach – (301) 871-8206

Consumer Health Care Coalition (Delaware) Joann Hasse – (302) 478-4096

Community Catalyst Nomita Ganguly – (617) 275-2807

Carl J. Schramm, who holds a Ph.D. in economics, conducted a lengthy analysis of the implications of privatizing Maryland Blue Cross Blue Shield, as well as this shorter summary of his findings.

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This story was published on Jan. 2, 2002.