City Files Suit Against CareFirst

The District has sued Group Hospitalization and Medical Services Inc., the portion of CareFirst BlueCross BlueShield operating in the District. Suit was filed in D.C. Superior Court this afternoon, according to a docket listing.

More on what prompted Attorney General Peter Nickles to file the suit here and here.

LL is trying to get his hands on the complaint. More to come.

UPDATE, 5:05 P.M.: Here is the complaint. The case has been assigned to Judge Natalia Combs Greene; initial conference is scheduled for Sept. 26.

UPDATE, 5:19 P.M.: CareFirst has issued a corporate statement regarding Ward 3 Councilmember Mary M. Cheh’s actions, which reads in part, “We are disappointed that the DC Council’s Committee on Public Services and Consumer Affairs voted today to take this action. Given CareFirst’s compliance with regulatory reporting requirements in the District, taking such a confrontational stance seems excessive and wasteful, especially since, if asked, CareFirst would supply any requested information….CareFirst’s role in the community has already been examined by Washington, D.C. regulators and their findings affirm that CareFirst meets its obligations. We are confident that any reasonable review will find that CareFirst meets its obligations both to its members and the communities we serve.”

UPDATE, 5:22 P.M.: In a phone interview, Cheh says the Nickles lawsuit is not at odds with her own efforts, calling them “parallel tracks.”

The Nickles suit, she notes, is focused solely on the propriety of the size of GHMSI’s surplus, while Cheh says she intends to investigate the surplus with “a broader lens.”

“I want to look at the surplus in the lens of continually rising rates, high levels of executive compensation, an acknowledgment that they have a responsibility to return community benefits to their subscribers and to the District in general. All of that is of a piece.”

UPDATE, 5:50 P.M.: Some highlights from the complaint, which charges CareFirst with “willful violation of charter” and “breach of charitable trust”:

• GHMSI has built up a “surplus that exceeds the level required for any legitimate charitable or nonprofit purpose.”
• “Soon after CareFirst assumed control of GHMSI in 1997, the pursuit of profitable business and the building of asset value became GHMSI’s bottom-line goals….As part of this plan, CareFirst sought to discontinue its role as “insurer of last resort” and to shift its business from “unprofitable segments” to more profitable ones.”
• By 2004, GHMSI had amassed a surplus nearly three times the nationally recommended cash reserve level
• “Other regional nonprofit BlueCross/ BlueShield plans have succeeded financially and accumulated strong surplus levels and also continued to pursue a ‘public benefit mission’ of serving vulnerable populations of insureds and subsidizing products to increase affordability.”
• “Rather than heeding regulators’ warnings regarding the need to refocus its attention on charitable and nonprofit purposes, CareFirst has continued to make profit generation the most important factor in calculating financial incentives for its president and CEO.”
• The suit asks for the following remedies: declaratory judgment, an injunction barring CareFirst from further charter violations, an order empowering the District’s insurance regulator to “rehabilitate” GHMSI, appointment of a Special Master to oversee said “rehabilitation”, plus costs and other damages.

This entry was posted on Tuesday, June 24th, 2008 at 4:37 pm and is filed under CareFirst, Health, Peter Nickles, Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.