IN A SENSE, CareFirst BlueCross BlueShield lost its bid to become a for-profit company by undermining its own name. In rejecting its proposal after 18 months of painstaking inquiry, Insurance Commissioner Steven B. Larsen said the company had acted as if its name were "Bonus First."
The conversion plan, he said, was driven by $119 million in executive bonuses. He called them "a central consideration ... a ransom a bidder would have to pay." The entire conversion proposal, he found, was deeply flawed and violated state law.
After an admirably thorough process, he ruled a conversion would not be in the public interest.
In addition, his findings represented a warning to those who might feel state regulators are not up to their mission.
The General Assembly must now decide what's next for CareFirst. Legislators - many of whom were outraged by the bonus packages - must help the company return to its original mission: offering health care coverage as a nonprofit. It should proceed quickly to reassure CareFirst's 3 million current customers. But it must also find ways to handle the unmet insurance needs of low-income Marylanders.
A health committee formed this year in the House of Delegates, headed by Del. John Adams Hurson of Montgomery County, had already begun evaluating various approaches to these needs. Even if the conversion to for-profit status had been approved, an insurer of last resort was needed.
CareFirst argued that the sale to California-based WellPoint Health Networks Inc. for $1.37 billion would provide capital CareFirst needed to grow - and that the sale price would allow Maryland to provide what many thought CareFirst had been providing, coverage for the "toughest to insure."
Some of Mr. Larsen's investigative findings about the insurer's current practices flew in the face of that.
Though still a not-for-profit company, he found, the company charged "excessive" premiums for subscribers with chronic ailments - "a relatively small but vulnerable population of sicker CareFirst members."
That finding may have pushed Mr. Larsen toward his ultimate conclusion. He said WellPoint, the proposed parent company, would not provide records he needed to determine if "affected communities would still have access to affordable health care." Stonewalling Mr. Larsen turned out to be a very bad idea indeed.