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The deal has been accepted by Maryland officials and representatives of the national Blue Cross association, but CareFirst officials balked when it was presented to them yesterday.
The tentative settlement reached late Tuesday would soften a reform law, which the association said amounted to a state takeover of CareFirst. The proposed deal would also end the association’s move to cancel CareFirst’s license to operate as a Blue Cross plan.
After a 2 1/2 -hour closed-door session with U.S. District Judge J. Frederick Motz yesterday, Maryland and national Blue Cross officials said they would continue discussing the plan with CareFirst executives and with regulators in Delaware and Washington. The parties hope to reach a final settlement by tomorrow’s deadline.
Motz had originally ordered an 11-day standstill, which ended yesterday, to allow the parties to resolve three different lawsuits triggered by Gov. Robert L. Ehrlich Jr.’s signing of legislation May 22 to reform CareFirst.
CareFirst had been excluded from those talks, and company officials said yesterday that they were unsure the proposed deal addressed all concerns.
Under the tentative agreement between the state and the association, five board members would be replaced in December. The five would work with Maryland board members to replace seven more by the end of June. Two nonvoting members would be appointed to the board.
On the issue of compensation, the association agreed to make executives’ pay comparable to that of their peers. The parties also agreed to retain CareFirst’s nonprofit status for at least five years.
“I think with this agreement we have satisfied the association’s concerns,” said State Attorney General J. Joseph Curran Jr. “Our major, primary problem was to resolve the license issue. I remain optimistic about reaching an agreement with the other parties.”
But CareFirst spokesman Jeffery W. Valentine said the company had a number of issues.
“Our major problem with the agreement is that it didn’t include us,” Valentine said. “But a key concern now is that we need an agreement that is not only acceptable to Maryland and the Blues association, but also will be acceptable to CareFirst and the other jurisdictions where we do business.
“We have been specifically ordered by Delaware and the District of Columbia not to modify our bylaws without the express approval of both of those insurance commissioners,” Valentine said. “This law will require us to modify our bylaws, and that puts us into conflict with our affiliation agreements with the other jurisdictions.”
CareFirst attorneys are expected to begin talks with the state and the national association today. Curran said he will also contact insurance commissioners in the other two jurisdictions.
“Our priority was to get the license back,” Curran said. “We’ve agreed to address the association’s concerns. They’re OK. The state of Maryland is OK. The other pieces of the puzzle are now going to be worked on.
“But delicensing is off the table,” Curran said. “We will not be delicensed if the deal goes through.”
Officials from the national Blue Cross association said they were eager to conclude negotiations.
“Our intent is to get them relicensed,” said Brian Crawford, a spokesman for the Chicago-based trade group. “We’re really optimistic and hopeful that we can resolve this quickly for everyone concerned, particularly consumers.”
The CareFirst dispute began in 2001, when the nonprofit insurer announced a deal to convert to for-profit operation and sell itself to California-based WellPoint Health Networks Inc. for $1.3 billion.
But after a review, then-Insurance Commissioner Steven B. Larsen rejected the deal in March, saying CareFirst’s board had failed to negotiate a fair price and had approved illegal bonus packages for executives.
After Larsen’s report, the General Assembly unanimously approved reform legislation that called for a nominating panel appointed by state officials to replace 10 of CareFirst’s 12 Maryland board members; for the other two members to be replaced next year by the board; for an oversight committee of legislators and others to monitor CareFirst; and for the insurance commissioner to review executive compensation.
As soon as the governor signed the legislation, the national Blue Cross organization and CareFirst challenged its provisions and the dispute moved into the courts.
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