Hundreds of Millions of Dollars at Stake


Next Monday will be a very important day for residents of the District of Columbia, Maryland, and Virginia. That’s when CareFirst BlueCross BlueShield has been ordered to file a plan with the District’s Insurance Commissioner detailing how it intends to spend down excess surplus that is attributable to the company’s profits in the District.

The amount to be spent down in the District is $56 million. But the amount of excess that is attributable to profits in Maryland and Virginia is much larger–$142 million in Maryland and $70 million in Virginia.

Here is how the order to spend down surplus in the District came about and why it matters to everyone in D.C., Maryland, and Virginia.

Congress chartered CareFirst as a Nonprofit Under D.C. Law

CareFirst is a nonprofit company. It is the largest health insurer in the mid-Atlantic region. The D.C.-based portion of the company is Group Hospitalization and Medical Services, Inc. (GHMSI). GHMSI operates in the District, Northern Virginia, and two counties in Maryland–Montgomery and Prince George’s.

Unlike the rest of CareFirst, GHMSI is governed by a congressionally enacted charter. That charter provides that GHMSI is to be regulated by the District pursuant to the laws of the District. The reason Congress gave the District this authority was to ensure that conflicts would not develop among the three jurisdictions and because, as Congress said when it established the District’s authority in 1993, GHMSI had previously “adeptly played Maryland, Virginia, and D.C. insurance regulators against one another.”

The D.C. Commissioner Found CareFirst’s Surplus Excessive by $268 Million

In December, acting pursuant to the congressional charter and the relevant District law, the D.C. Insurance Commissioner found that GHMSI’s nearly $1 billion surplus was excessive by $268 million. He therefore ordered the company to submit a plan by March 16 for spending down the $56 million in excess attributable to the District. Under District law, the plan can spend down the $56 million through premium reductions, refunds to subscribers, and/or programs to improve health and healthcare. It will then be up to the D.C. Commissioner to decide whether the plan meets the legal requirement of being “fair and equitable.”

Meanwhile, it will be up to regulators in Maryland and Virginia to decide whether and how to spend down the $212 million in excess attributable to those two jurisdictions.

CareFirst Seeks to Avoid Returning Excess to D.C.–and Maryland and Virginia

Unfortunately, rather than focusing on how best to use this excess surplus in ways that will allow the company to meet its nonprofit mission to serve current, past, and potential subscribers, CareFirst is seeking instead to avoid spending any of its excess surplus at all. And it is doing so through the very strategy Congress meant to prohibit–by playing the District, Maryland, and Virginia against each other.

For example, CareFirst has suggested to Maryland lawmakers that the District is improperly attempting to take revenues that belong to Maryland. But that is not so. The D.C. Commissioner has jurisdiction only over the portion of GHMSI’s excess surplus that is attributable to its profits in the District. And the Commissioner has very conservatively estimated those profits as only 21% of the company’s overall profits, leaving to the Maryland and Virginia Commissioners to determine how–if at all–to use the remaining 79% to benefit residents of those jurisdictions.

Even worse, CareFirst has made clear that instead of spending down its excess surplus to benefit residents of the three jurisdictions, it plans to use that surplus instead to go to court or lobby Congress to make sure that it can never be required to spend down any of its excess surplus to benefit residents in any of the three jurisdictions.

The Entire Region Deserves a Company that Meets Its Nonprofit Mission

We believe it is time for CareFirst to be held accountable to its mission as a nonprofit. We also believe now is the moment when residents and officials of the three jurisdictions should make clear to the company that they want it to start meeting that mission. The benefits of doing so are huge: investing $268 million in reduced premiums and/or improved health care can make a big difference in the lives of a lot of people in this region.

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