On June 25 the D.C. Department of Insurance held a hearing to decide what the appropriate size of the CareFirst reserve fund should be. Individuals, small businesses and nonprofit groups in the District who are CareFirst policy holders have a vested interest in the outcome of what may become the District's latest reach into their pocketbooks. The D.C. Council previously passed legislation that could have the impact of using any CareFirst reserves deemed excess on public programs instead of returning it to their subscribers.
The Commission took testimony from CareFirst and D.C. Appleseed and Rector and Associates who did a recent study and said the reserve fund is not excessive. According to the Washington Post, CareFirst says, "They should carry a surplus equal to 10 to 13 times its authorized control level - a reserve minimum below which regulators can take control of the company." Others like D.C. Appleseed dispute that.
As a nonprofit CEO for over 30 years, I have chosen CareFirst to contract with for health insurance for my employees. Small businesses and small associations like the one I manage in the District are disproportionately covered by CareFirst because they provide excellent service with competitive rates.
The reasons CareFirst gives for maintaining a large reserve fund relate to mandates by the localities they serve, including Maryland and Virginia, and requirements by the federal government. The claimed purpose is to ensure coverage for individual needs and to have enough available for a potential natural disaster or terrorist attack in which thousands may need coverage at the same time.
The first issue for the Insurance Commissioner in D.C. to determine is the appropriate level of reserves. Once that is done the second issue that remains and which is just as important to those who have paid their premiums to the company for years, is what should be done with the money if it is determined that there are excess reserves.
There is only one acceptable answer to that question and it is "return the money to the individuals, businesses and non-profits that have paid the premiums." We already know that can be done. Under the Affordable Care Act insurance companies must spend 80 percent of premiums on health care and CareFirst subscribers have received a rebate when that didn't happen.
What shouldn't happen is to view this as a free pot of money for D.C. politicians to hand out. The District of Columbia government doesn't even allow its employees to purchase insurance from CareFirst.
The policies paid for by CareFirst subscribers already include the cost of funding the Insurance Commission. Recently the D.C. Council passed legislation taxing all healthcare policies sold in the District to pay for the Health Benefit Exchange Authority set up under the Affordable Care Act.
The decision the Insurance Commissioner makes on this issue will have the most impact on individuals, small businesses, and nonprofit associations with employees living and working in the District. The same people who often struggle to afford quality health insurance for themselves, their families and their employees. If the Commissioner determines that there is an excess and doesn't ask CareFirst to return it to subscribers in the form of rate reduction or rebate it would cause direct and immediate harm. It would have to be considered a tax on the individuals, businesses, non-profits and their employees based simply on their choice of an insurance provider. Their premiums could rise in future years because the District forced the siphoning off of the money they paid in premiums which went into the reserve fund.
It is the role of the Commissioner of Insurance to protect the interests of those tens of thousands of D.C. residents who paid their insurance premiums to CareFirst. While groups like Appleseed cloak all their work in the public good in this case they are simply helping the D.C. government find a new pot of money to spend. If money is needed to fund wellness programs in the District, and it well may be, the D.C. Council should have taken that into consideration before passing its recent tax cuts. It is not up to the Insurance Commissioner to assist the D.C. Council in picking the pockets of one insurance company's subscribers. They need to determine the correct level of reserves for CareFirst and then insist that any excess be returned to subscribers whose money it is.