Local Insurer Still Has an Obligation to Invest $56 Million in the Health of DC Residents

There is a new development in a long-standing dispute between the District and the health insurer CareFirst over its excess surplus in 2011. A proposed consent order from the DC Insurance Department could result in CareFirst contributing millions over the next 10 years to community health initiatives. Yet it’s difficult to say whether this is good news for District residents.

The DC Department of Insurance, Securities and Banking (DISB) found that CareFirst had $56 million in excess surplus in 2011 based on its business in DC.  The Commissioner ordered the company, also known locally as GHMSI, to file a plan to reinvest the $56 million to meet community health needs. When CareFirst failed to submit a satisfactory plan, the DC Insurance Commissioner announced he would develop a plan to spend the excess surplus and sought public input. The Commissioner initially decided that the surplus would be returned through rebates to CareFirst customers.

Then last month, a new agreement emerged. CareFirst requested that DISB adopt a proposed consent order negotiated between the two, under which CareFirst would provide $7.5 million in grants for community health initiatives in the District for each of the next 10 years.

While that sounds good, because it would inject much-needed dollars into community health programs and services, there are several reasons why the proposed consent order falls short:

  • The proposed order does not bring community stakeholders to the table. The order is premised on the idea that it is a fair and effective way to end the surplus review and determination proceeding. However, the consent order was not developed with any community input.
  • The community investments could replace CareFirst’s community spending, not supplement it. As a non-profit insurer in the District, CareFirst already is required to devote a portion of its operating expenses each year toward community reinvestments. But as the order is written, it’s unclear whether CareFirst would be obligated to spend down the surplus in addition to its required community investment, or in place of it. Considering that those expenses currently total several million dollars, this would mean that the net value of the proposed settlement would be far less than $7.5 million per year, and far less than $60 million in net present value over the full 10 years. In other words, it could short-change District residents of the reinvestments they are rightfully owed.

While CareFirst and DISB should be applauded for working to resolve this important issue, the proposed consent order still falls short of the financial and community obligations owed to District residents. DISB should not accept any proposed consent order that does not include community input or represent a true spend-down of CareFirst’s $56 million excess surplus.