CareFirst of D.C. would be compelled to surrender a percentage of its burgeoning revenues for the community’s benefit or risk no rate increases for a year under legislation to be considered by the D.C. Council.
Chartered by Congress in 1939 as a “charitable and benevolent institution,” the Maryland-based nonprofit health insurer and its D.C. affiliate, Group Hospitalization and Medical Services Inc., are under fire from critics who say they dedicate few dollars to charitable care — despite collecting roughly $2 billion a year in premiums and sitting on a $754 million surplus.
Those critics are now attempting to force the money from CareFirst’s deep pockets.
Ward 3 Councilwoman Mary Cheh, chairwoman of the Public Services and Consumer Affairs Committee, today will propose directing the mayor to establish “a percentage of gross premiums from all sources that must be devoted to community health reinvestment,” according to a draft version of the bill.
“I had hoped to work out a settlement,” said Cheh, whose committee began an investigation into CareFirst in June.
“But that came for naught.”
CareFirst spokesman Kevin Kane declined comment.
The corporation has argued in the past that it dedicates millions to community care in the District despite D.C. comprising a fraction of its 3.2 million area membership.
The legislation finds that CareFirst has a mission to reinvest in the community’s health “to the maximum feasible extent” and “should not be permitted free rein to accumulate surplus. …”
D.C. leaders believe CareFirst has built up massive surpluses to make it more attractive for a for-profit takeover.
Like many CareFirst critics, Walter Smith with D.C. Appleseed maintains the insurer has “lost sight of its mission.”
Smith contends CareFirst should be reinvesting up to $100 million a year.
CareFirst would have the opportunity to prove it cannot afford to meet the city’s demand, according to the bill, but if it fails to settle, “the mayor shall deny for 12 months all premium rate increases sought by the corporation.”
The tenuous relationship between the District and CareFirst disintegrated earlier this year after the insurer declined to invest $5 million in Healthy D.C., a council initiative aimed at reducing the number of uninsured District residents.
D.C. Attorney General Peter Nickles sued the insurer in June, arguing the corporation accumulated a surplus that “far exceeded whatever it might need to support its charitable, public benefit purposes.”
