Maryland bucks national trend, blocks Blues for-profit conversion

The decision, based in part on how physicians would be negatively affected, is expected to embolden opposition to such moves in other states.

By Robert Kazel, AMNews staff. March 24/31, 2003.

The road ahead for Blue Cross Blue Shield plans that wish to convert to for-profit status, possibly in an effort to be acquired by large, private insurers, may be getting bumpier.

The Maryland insurance commissioner's blistering, impassioned rejection March 5 of the proposed for-profit conversion of CareFirst BlueCross BlueShield is likely to energize regulators to scrutinize such proposals with intensity, industry analysts say. Commissioner Steven B. Larsen cited strained relations between physicians in states with Blues plans run by WellPoint Health Networks Inc., which would have acquired CareFirst after its conversion, as one of many reasons to scotch the plan. A conversion would "negatively affect quality of care," Larsen said.

"It's a big red flag that every other state is going to look at," said Clifford A. Hewitt, a health care analyst in Baltimore. "If you're on a board of a Blue Cross plan and you're contemplating converting to for-profit, I think you're going to really think twice now if it's in the best interest of subscribers."

CareFirst, which said in a prepared statement it was "shocked and disappointed" by Larsen's move, has until early April to challenge the decision in court. The plan has not indicated whether it will.

The Maryland decision comes as four other states wrestle with proposed Blues plan conversions.

In Kansas, the state Supreme Court is expected to rule April 18 over whether Blue Cross Blue Shield of Kansas may convert to for-profit status. The state insurance department had said last year that the Blues' conversion, and subsequent acquisition by Anthem Inc., would raise premiums by millions of dollars.