As Washington, D.C., legislators and CareFirst continue discussions on a bill that would put new restrictions on the insurer, Maryland lawmakers are working to prevent any negative fallout in their state.

Thomas "Mac" Middleton

Maryland Sen. Thomas “Mac” Middleton (D-Charles) has filed a bill that would take effect June 1 to let Maryland Insurance Commissioner Ralph S. Tyler decide if the District’s legislation is “harmful to the interests of subscribers” in Maryland, according to the text of the proposed bill. The Senate bill follows one filed earlier in the Maryland House by Del. Shane E. Pendergrass (D-Howard), filed March 9.

The commissioner would then have the power to prohibit CareFirst from using any Maryland-generated funds for programs in other areas, such as the District.

“I’m hopeful that this legislation will not be necessary as the District and CareFirst are in discussions regarding a possible postponement of an open enrollment program,” Tyler told IFAwebnews.com. “If that occurred, there would be no need for [the Maryland] legislation.”

CareFirst has $1.27 billion in reserve, with about $753 million with GHMSI, which covers 1.2 million policyholders, including 150,000 in the District, 700,000 in Maryland and 300,000 in Northern Virginia.

In December 2008, the D.C. Council approved The Medical Insurance Empowerment Act, requiring that CareFirst’s District affiliate, Group Hospitalization and Medical Services, Inc., have its reserves scrutinized by the Commissioner of the Department of Insurance, Securities and Banking, Thomas E. Hampton.

If Hampton finds that the reserves are excessive, CareFirst would be required to provide a plan for dedication of excess reserves to community health reinvestment through an open enrollment program, according to the text of the bill.

The D.C. law is set to go into effect after being passed to Congress by D.C. Mayor Adrian Fenty, who did not endorse the legislation. The Congressional review is almost complete and the insurer said it is preparing for its implementation.

“We are working with District officials and regulators regarding the implementation of the legislation,” Michael Sullivan, a CareFirst spokesman, told IFAwebnews.com.

While that process plays out in the District, Middleton, who chairs the Senate’s Finance Committee, filed SB 1070 March 26. The bill would authorize Tyler to hold a hearing to review the impact on surplus, premium rates for Maryland policies and solvency as a result of the District’s actions.

If through his hearing Tyler finds any harm to Maryland policyholders, he would have the authority to issue an order that could prohibit CareFirst from subsidizing plans or programs in the District or other states through premiums charged to Maryland subscribers or surplus earned through Maryland policies.

“The purpose of the bill is to create a mechanism to evaluate the impact of the legislation in the District,” Tyler said. “The bill looks to protect against the use of a portion of surplus generated through Maryland as being used to pay for or subsidize the open enrollment program [required under the D.C. bill].  I hope they are successful in getting a postponement of the program in the District.”

The bill has been referred to the Senate’s rules committee.