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CareFirst Hoards Surpluses During Health Care Emergency

Some top executives in DC Mayor Muriel Bowser’s administration appear to be suffering from amnesia. Maybe it’s the stress of dealing with the novel coronavirus pandemic and public health emergency. 

How else to explain why they are intent on pushing through a Medicaid contract with a company — MedStar — whose past behavior jeopardized the fiscal health of two other managed care organizations and damaged the entire program? Another company with whom the District is seeking to finalize a contract — CareFirst — owes the city millions of dollars in cash or services; it also appears to be flaunting DC small business certification laws, with tacit support from government officials. 

If you read last week’s column, you already know about the former company. Let me tell you about the latter.

As a nonprofit, charitable corporation, CareFirst BlueCross BlueShield is supposed to be in the giving business. Instead, it has shown a propensity for hoarding. For example, as of 2007, it had a surplus of $754 million that it refused to share with any needy population in the Washington metropolitan region.

In 2008, DC Attorney General Peter Nickles filed a lawsuit against Group Hospitalization and Medical Services Inc., the section of CareFirst BlueCross BlueShield operating in the District. That legal action came moments after Ward 3 DC Council member Mary Cheh persuaded her committee to launch an investigation, replete with subpoena powers.

“Instead of providing charitable [contributions] to the community, they have been putting money into surpluses and paying large executive salaries. We’re basically asking for a reshaping of the entire CareFirst organization in DC,” Nickles told The Washington Post at the time of the filing.

Meanwhile, Walter Smith, executive director of the DC Appleseed Center for Law & Justice, persuaded the legislature to take a different course of action. The council passed a law that required the commissioner of the DC Department of Insurance, Securities and Banking (DISB) to evaluate the size of the CareFirst excess surplus and determine how that should be spent. That move by the legislature eventually ended Nickles’ lawsuit.  

In 2009, there was a hearing before the insurance commissioner. The next year, the department found that CareFirst had no excess surplus. Smith told me during an interview last week that he had been incredulous. Consequently, in 2010, he took the matter to the DC Court of Appeals.

A decade after the fight with CareFirst began, little has changed. “We’re in a public health emergency,” Smith told me last week. “They have a rainy day fund that is bigger than the rainy day fund of the District of Columbia. We have been urging CareFirst to spend down its excess surplus to address community health care needs.”  READ MORE

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