CareFirst Must Follow the Law


CareFirst BlueCross BlueShield is a nonprofit and the largest health insurance company in the region. The D.C.-based portion of CareFirst is Group Health and Medical Services, Inc. (GHMSI). GHMSI is governed by a congressionally enacted federal charter. That charter provides that GHMSI is to be conducted as a charitable and benevolent entity. The charter also provides that GHMSI is to be regulated by the District of Columbia.

The District has sought for nearly 10 years to require GHMSI to abide by its charitable mission as set out in its congressional charter–beginning with a 2005 determination by the D.C. Insurance Commissioner that GHMSI had excessive surplus and that the surplus should be spent down in ways that would benefit subscribers and the public. At the time of that determination, GHMSI’s surplus was approximately $500 million. It is now nearly $1 billion.

D.C. Ordered CareFirst to Spend Down $56M

Last December, the D.C. Insurance Commissioner completed a year-long examination of GHMSI’s surplus–in compliance with laws passed by the D.C. Council, signed by the Mayor, and duly ratified by Congress. Based on that examination, the Commissioner determined that GHMSI’s surplus is excessive by $268 million, and he ordered the company to file a plan to spend down the portion of that excess that is attributable to premiums earned in the District–$56 million.

CareFirst Failed to File a Spend-Down Plan

Last week, the company filed its response to the Commissioner’s order. But rather than comply with the order, the company instead told the Commissioner that he was wrong to determine that it has excess surplus and that, in any case, it had already spent down the $56 million. The company therefore informed the Commissioner that it was not filing a spend-down plan as he had directed.

This is not the way the rule of law works in this country. CareFirst will have an opportunity to challenge the Commissioner’s ruling in court if it chooses, but it is not entitled to unilaterally defy his order. Moreover, that order has been 10 years in the making, and residents all over the region–as well as past subscribers, current subscribers, and potential subscribers–all have a stake in making sure that CareFirst and GHMSI comply with the law.

D.C. Leaders Should Ensure that CareFirst Follows the Law

The District government itself has a stake in making sure the rulings of its agencies are followed. We hope for that reason that the District’s leaders will stand behind the Commissioner’s decision and support his efforts to ensure that CareFirst complies with the law. As we urged the Commissioner in a letter today, he should reject CareFirst’s March 16 filing entirely, and exercise his statutory authority to develop his own spend-down plan and invite public comment.

Doing so will put the District in good company with other jurisdictions addressing similar issues. More than a decade ago, then-Maryland Insurance Commissioner Steve Larsen stood up for subscribers and the public when he denied CareFirst’s attempt to convert to for-profit status and sell itself for hundreds of millions of dollars less than it was actually worth. And just recently, it was revealed that California regulators revoked Blue Shield of California’s tax exemption amidst doubt about whether it is fulfilling its responsibility to the public, including by maintaining a $4 billion surplus.

After many years of delay and CareFirst’s refusal to comply with its mission and the law, we urge the District to back the D.C. Commissioner’s decision. This will not only serve the rule of law, but it will also serve residents of the region.

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