Almost There: Holding CareFirst Accountable

I want to give you an important update on our longstanding effort to hold CareFirst BlueCross BlueShield accountable to the public and ensure that it spends the excess of its nearly $1 billion surplus on community healthcare needs.

The good news is that CareFirst for the first time has admitted that it has excess surplus, and has offered to start spending it on community needs. The bad news is that the amount it is offering–$7.5 million per year for the next 10 years–is way too low.

Still, this is progress, and DC Appleseed has offered to enter into settlement negotiations with the company to help determine an amount that fulfills the company’s obligation to the public and to subscribers.

Given recent reports that CareFirst is seeking rate increases of up to 58% for next year, and given that actions on the Hill and in the Trump Administration may cause some area residents to lose their health insurance, it is more important than ever that we determine soon just how much excess surplus CareFirst should be required to give back in refunds, rate reductions, subsidies, and to otherwise address community health needs.

Here is the current situation and the likely next steps.

It’s a Good Sign that Settlement is On the Table

As you may remember, in August 2016, the D.C. Insurance Commissioner ordered the company to rebate $51 million in excess surplus to subscribers with District-based contracts. But then, three weeks ago, the Commissioner issued a proposed settlement order that was developed by CareFirst, in consultation with the Commissioner’s and D.C. Attorney General’s staffs. Under this proposed order, the Commissioner would rescind the requirement that CareFirst rebate to subscribers, and instead would require CareFirst to spend $7.5 million annually on charitable giving over ten years.

We’re glad that the Commissioner, the Attorney General, and CareFirst are exploring the possibility of a settlement. We’re also glad that CareFirst at long last acknowledges that it must spend significant money on community healthcare needs. However, as we said in comments filed Tuesday with the Commissioner, we don’t think the company’s proposal should be accepted. Here’s why.

CareFirst’s Settlement Proposal Shortchanges the Public

First, the proposed settlement amount is obviously too low. We will argue on appeal that the amount that must be reinvested by CareFirst in D.C. from its excess surplus is approximately $300 million. CareFirst’s proposal to spend only $75 million over 10 years–the present value of which is just $60 million–is only slightly higher than the amount the Commissioner’s order already required the company to spend on rebates. Because there is a good chance that the D.C. Court of Appeals will require the company to reinvest a much larger amount than the proposed $60 million, DC Appleseed does not support the proposal. And we don’t think the Commissioner or the Attorney General should support it either. It is simply not in the public interest to do so.

Second, there’s no indication that the proposed $75 million is in addition to the charitable giving that CareFirst is already engaged in as required by law. CareFirst should be returning previously accumulated excess surplus to the community. But  there is nothing in the proposed order requiring that CareFirst reinvest its excess surplus in addition to meeting its separate obligation under the law to spend the maximum feasible amount from annual revenues on community reinvestment.

Third, it did not serve the public interest for the Commissioner’s and the Attorney General’s staffs to negotiate a proposed settlement with CareFirst while excluding DC Appleseed. As the Court of Appeals has explained, this is an adversarial proceeding brought about by DC Appleseed, that DC Appleseed has participated in from the beginning, and that is being conducted pursuant to a law that DC Appleseed helped develop. If the matter is to be settled through negotiation, it serves the public interest to include DC Appleseed in that negotiation. And proposing a settlement without our participation will not serve to end the proceeding: either the Commissioner will disapprove the proposal, or he will approve it over our objection, in which case we will appeal. Either way, negotiating a settlement of our long dispute with CareFirst–yet excluding us from the negotiation–will not advance the goal of ending the dispute.

The Commissioner Should Give a Fair Opportunity to Negotiate a Settlement

For these reasons, we hope the Commissioner will call for a fair opportunity for his staff, the Office of the Attorney General, CareFirst, and DC Appleseed to negotiate a settlement. If we all can agree, we can at long last end this proceeding. If we do not agree, it will be up to the Court of Appeals to decide. Either way, we’re closer than ever to at long last holding the company accountable. Stay tuned.

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