- The Washington Times - Monday, February 21, 2005

ANNAPOLIS — CareFirst BlueCross BlueShield will absorb the 2 percent premium tax imposed by the legislature last month rather than pass along the cost to the 330,000 members of its HMO plans, the company announced yesterday.

“Our directors determined that our overall financial status, market conditions, trends and forecasts allow CareFirst to make this commitment to keep HMO premiums more affordable for our members in 2005,” said William L. Jews, CareFirst president and chief executive officer.

“We are pleased to be able to take this action and are hopeful that future market conditions make it possible for us to continue to moderate premiums,” he said.

Three other health maintenance organizations — Mid-Atlantic Medical Services Inc. (MAMSI), Aetna Inc. and Kaiser Permanente — are raising rates on either March 1 or April 1.

Democrats imposed the 2 percent tax on HMOs ” the only insurers that had been exempted from the premium tax ” to help reduce the cost of malpractice insurance and to increase payments to doctors for some services provided through the Medicaid program. Gov. Robert L. Ehrlich Jr. vetoed the bill because of the tax, calling it “Economics 101” that insurers would pass along the tax increase to their policyholders.



Democratic leaders said the CareFirst announcement vindicates their position that insurers could absorb some or all of the tax increase.

“I’m ecstatic,” said Senate President Thomas V. Mike Miller Jr., Prince George’s County Democrat.

“The Ehrlich administration called it Economics 101 when Aetna and MAMSI passed on the cost of the loophole closing,” Mr. Miller said. “I think this demonstrates that CareFirst understands Leadership 101 and Responsibility to the Public 101.

“What they’ve done is the very right thing to do,” he said.

House Speaker Michael E. Busch, Anne Arundel County Democrat, said CareFirst “put the consumer first.”

“If he had an insurance administration who put the consumer first, I think we would have had a fairer process with the other commercial insurers,” Mr. Busch said. “I believe the other commercial insurers got a windfall.

“Had the insurance administration looked out for the consumers, which is Maryland’s small businesses, they would have done everyone a service,” he said.

Democratic lawmakers last month castigated state Insurance Commissioner Alfred Redmer Jr. when he sent a bulletin to insurance companies notifying them that they could pass the tax increase onto their customers without getting prior approval of the Maryland Insurance Administration (MIA) simply by sending him a letter.

“The letter submitted to the MIA will constitute the rate filing, which will be deemed approved upon receipt by the MIA,” the bulletin dated Jan. 13 said.

Mr. Redmer later said insurers had to wait for a written response from the administration before rate increases were approved officially.

Democrats called Mr. Redmer’s bulletin an invitation to the insurers to raise rates.

Ehrlich spokesman Henry P. Fawell said Mr. Redmer “does not set public policy. He is required to implement policy set by the legislature, even if the governor disagrees with it.”

Mr. Fawell referred questions about whether Mr. Redmer should have required other insurers to justify a rate increase to the insurance administration.

Mr. Fawell said Mr. Ehrlich, a Republican, “is pleased with the CareFirst decision. Unfortunately, it means nothing to the hundreds of thousands of other Marylanders who will still be paying more for health care as a result of the legislature’s tax hike.”

Mr. Redmer and his spokeswoman did not return telephone calls yesterday seeking comment about the CareFirst decision.

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