CareFirst's Proposed Conversion and Merger with Wellpoint May Not Serve Public Interest

Ron Pollack, executive director of Families USA, released the following statement today about CareFirst's proposed conversion and merger with Wellpoint:

"In both our capacity as a national health care consumer advocacy group and as a CareFirst subscriber, we caution District officials that the public interest may not be served by CareFirst's proposed conversion to a for-profit in order to merge with Wellpoint.

"CareFirst does not need to become a for-profit in order to remain viable as a health insurance company. CareFirst's own financial documents belie the stated reason for the merger. According to documents filed with the Insurance Commissioner, CareFirst's reserves are currently 622% above minimum requirements. These assets are more than sufficient for CareFirst to continue operations as a nonprofit. Indeed, CareFirst could, and should, now use its significant assets to increase its services to the community.

"Citizens of the District of Columbia with serious health conditions may be left uninsured and with few options by this proposed merger. CareFirst is the last insurance company left standing in the District of Columbia that must offer an open enrollment period. Currently, for-profit insurers are not forced to cover individuals with serious health conditions. Once CareFirst converts to a for-profit and merges with WellPoint, it will most likely not cover individuals with serious health conditions and the District of Columbia will no longer have an insurer of last resort. CareFirst has already submitted a community impact statement warning the public that, while Wellpoint could opt to continue open enrollment, 'most plans would not choose to offer open enrollment without compensation for doing so.'

"If CareFirst converts to a for-profit and merges with Wellpoint, Blue Cross executives could gain significant compensation through the proposed merger at the expense of consumers. Absent of legislation to limit executive pay, former CareFirst executives may receive large golden parachutes, or large raises to continue as executives of the for-profit insurer. Families USA released a study last June showing that two of Wellpoint's executives were among the top five compensated HMO executives in the nation. CareFirst's merger with Wellpoint could therefore result in a significant diversion of District residents' health care dollars to executive compensation.

"CareFirst's present financial status remains strong enough to maintain its current role as a nonprofit insurer serving all consumers. Any conversion to a for-profit and merger with Wellpoint may negatively affect District residents."

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Families USA is the national organization for health care consumers. It is nonprofit and nonpartisan and advocates for high-quality, affordable health care for all Americans.

1201 New York Avenue NW, Suite 1100 · Washington, DC 20005
202-628-3030 · Email: info@familiesusa.org · www.familiesusa.org