There is great uncertainty about the future of healthcare in the District of Columbia. The Trump administration and Congress are trying to undermine the Affordable Care Act and limit the District’s ability to invest in public health. And this is happening when the need for better healthcare and better health outcomes is especially pressing in the District, where there are wide race- and place-based disparities both in access to providers and in outcomes.
Fortunately, there’s an enormous resource that can be brought to bear on this issue. The DC Insurance Commissioner is about to complete his review of CareFirst BlueCross BlueShield’s nearly $1 billion surplus, which he has found to be excessive by $268 million. He is expected to issue a final order in the next few weeks, and it should result in the investment of at least $51 million of the excess surplus in community healthcare needs in the District—with the potential for millions more being available later for both the District and the region.
This is happening because CareFirst has a special legal obligation to the national capital region. CareFirst’s District-based subsidiary, Group Hospitalization and Medical Services, Inc. (GHMSI), was chartered by Congress in 1939 as a “charitable and benevolent nonprofit.” It therefore has an obligation to use its assets to the maximum feasible extent to promote healthcare in the region, not just by providing insurance, but also by addressing unmet healthcare needs.
The problem is that the company has never met that obligation, so the DC Council passed a law in 2008 requiring the company to dedicate any excess surplus to health reinvestment. So far, due to years of litigation and delay, CareFirst has avoided complying with the law.
But the tide is beginning to turn. In August 2016, the Commissioner ordered CareFirst to rebate $51 million of excess surplus in the District by the end of that year. DC Appleseed, which has been involved in this issue for nearly 15 years, believes the amount of excess surplus owed the District is much larger than $51 million, and believes that the total excess surplus owed the region is much larger than the $268 million found by the Insurance Commissioner. We therefore asked the DC Court of Appeals to review the Commissioner’s decision.
Unfortunately, our appeal has been stayed because shortly after the Commissioner ordered the spending of the $51 million, CareFirst proposed to settle the case. So the Commissioner agreed to delay the spending of the $51 million case in order to conduct settlement negations. And as a result of the negotiations, in August of this year, he proposed that the case be settled by CareFirst agreeing to issue $95 million in grants from excess surplus to District-based non-profit healthcare providers. But on September 1, the company rejected the Commissioner’s offer and said it would pursue its legal options instead.
The bad news is that CareFirst has yet to spend any of its excess surplus on community health needs and further delayed the case by undermining its own proposal that the case be settled. The good news is that the Commissioner can now end any further delay by promptly ordering CareFirst to begin spending at least the $51 million here in the District.
As we said in a recent letter to the Commissioner, he should now order the company to issue grants of at least $51 million to nonprofit healthcare providers, and the $51 million should be increased by the interest the company has earned during the long delay. That will make sure that CareFirst begins to comply with its congressional charter and DC law by returning excess surplus to the public. It will also allow DC Appleseed’s appeal to proceed, which could result in another another $250 million excess surplus being reinvested in District healthcare needs.
Such an order may also prompt leaders in Maryland and Virginia to seek their share of CareFirst’s excess surplus. While to date those leaders have allowed CareFIrst to avoid returning any of its excess surplus to residents of those jurisdictions, that may change once CareFirst begins reinvesting tens of millions of dollars in the District. After all, as CareFirst CEO Chet Burrell has said, any excess surplus is the result of overcharging subscribers. Leaders in Maryland and Virginia will not want their constituents—many of whom contributed to the excess surplus—left out when it comes to things like support for community healthcare programs, rate relief, and rebates.
After so many years of delay, the District is on the brink of at last holding CareFirst accountable to its mission. When it does, healthcare in the District and the region will be improved.