A D.C. Council effort to seize a percentage of CareFirst’s excess revenue for community benefit is “misguided,” unfair, unwise and will lead to higher health care costs, the health insurer said Tuesday.
“Quite simply, enough is enough,” said the Owings Mills corporation, which has 3.3 million area members.
“CareFirst’s National Capital Area affiliate, while a not-for-profit, nevertheless paid $88 million in taxes in federal income and District premium taxes last year.
CareFirst pays its share — and then some.” Ward 3 Councilwoman Mary Cheh, backed by 11 of her colleagues, introduced legislation Tuesday that would require the mayor to set a percentage of gross premiums, on an annual basis, that CareFirst of D.C. must surrender to the city for “community health reinvestment.”
If CareFirst refuses, its proposed rate increases would be automatically rejected.
CareFirst, Cheh argues, collects more than $2 billion a year in premiums while accumulating a $750 million surplus, despite its nonprofit status and its congressional charter as a “charitable and benevolent institution.”
The District filed suit against CareFirst in June, arguing the insurer does not invest nearly enough in charitable care.
“If they take a deep breath and acknowledge the circumstances, they will see the legislation provides them with a needed framework to meet their obligations,” Cheh said of CareFirst. “And they can feel good about themselves.”
In the statement, CareFirst said its “reserves” amount to less than $1,000 per member, “or just a fraction of the cost of a day in the hospital.”
The insurer says it has given more than $100 million to “worthy community organizations and causes” over the past three years.
And the measure, it said, is akin to “taxing our reserves” and will lead to increased premiums.
The company promised to “vigorously oppose this legislation.”
“In short, the proposed legislation seeks to make CareFirst’s reserves a new revenue source for the District’s budget despite the fact that the overwhelming majority of CareFirst’s subscribers who have paid into our reserves are not residents of the District. …”
At-large Councilman David Catania, chairman of the health committee, said the relationship between CareFirst and D.C. “is just degenerating by the day.”
The insurer’s refusal to negotiate, Catania said, has left the District with no “lawful alternative.”
