CARE FIRST
Governor Ehrlich�s May 22 signing of legislation to reform CareFirst touched off a flurry of activity involving CareFirst, the national Blue Cross and Blue Shield Association and the State of Maryland. The legislation, which had been unanimously passed by both houses of the General Assembly, called for replacement of 10 members of the CareFirst Board of Directors by December 2003. It also authorized Maryland�s Insurance Commissioner to review and approve compensation guidelines for the company�s executives.
However, when the legislation was signed the national association revoked CareFirst�s license to operate as a Blues plan, and filed suit against CareFirst to prevent its use of the Blues trademark. The State then filed suit to block that move, and CareFirst sued the State, contending that the reform law was unconstitutional.
Intense negotiations resulted in a settlement that softens the reform measures, while retaining the intent of the legislation to return CareFirst to its original mission and retain its non-profit status. Under the new agreement, five Maryland directors will be replaced by January 2004 and will be selected by a Nominations Committee, to be named by July 2003. Those five new members will serve with the remaining seven members, who will be replaced by July 2004. Under the new agreement, the Insurance Commissioner will not have the authority to review CareFirst executive�s pay, but the company agreed to compensate their executives at a level comparable to that of their peers.
Legislators expressed surprise and anger at CareFirst for their efforts to have the reform bill vetoed, since their representatives had not raised objections to the proposed legislation during the Legislative Session. Although top officials from the company apologized at a recent joint hearing of the Senate Finance, and House Health and Government Operations Committees, Legislators expressed their continued lack of confidence in the company�s leadership.
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