With two different insurance departments reviewing the surplus held by health insurer CareFirst, the hope is for one uniform determination.

As part of the Medical Insurance Empowerment Act of 2008, which became District of Columbia law March 25, D.C.’s insurance commissioner must conduct an annual review of the non-profit’s surplus to determine if it is “excessive.” The latter is defined in the law as “greater than the appropriate risk-based capital requirements” as determined by the commissioner.

The first determination is due 120 days after the law took effect, or around July 25.

Thomas E. Hampton

“I’m under the gun here as I have to do this quickly,” Thomas E. Hampton, the District’s insurance, securities and banking commissioner, told IFAwebnews.com.

Owings Mills, Md.-based CareFirst has $1.27 billion in reserve, with about $753 million with its Group Hospitalization and Medical Services Inc. affiliate, which covers around 150,000 policyholders in the District, 700,000 in Maryland and 300,000 in Northern Virginia.

Hampton said his staff is close to having a consultant ready to begin reviewing the information from CareFirst, a step neighboring state Maryland has already taken.

Prior to the law’s passage in the District, Maryland Insurance Commissioner Ralph S. Tyler announced that he was planning a review of the insurer’s reserves.

Karen Barrow, a spokeswoman for the MIA, said the agency is working to finalize the selection of a consultant.

Hampton said his hope is that his consultant and the one from Maryland “are pretty much” in line with their determinations.

“Maryland will issue a separate report and I hope for consistency in determining whether there is excessive surplus,” he said. “There should be one determination.”

Barrow agreed, saying “the MIA agrees that we hope to work in concert with the other jurisdictions for the benefit of all parties.”

A more complex factor, Hampton noted, is determining what to do if the surplus is viewed as “excessive.”

Under the law, Hampton can order CareFirst to submit a plan for dedication of the excess to community health reinvestment “in a fair and equitable manner,” including what is due to the District.

“That is something that is difficult,” Hampton said.

Virginia Insurance Commissioner Alfred W. Gross said he has no intention to undertake a similar review, and rather “we’ll wait and see what Maryland and D.C. do.”

Representatives for CareFirst declined to comment on the surplus reviews.

The health insurer is currently working with District legislators on another portion of the law regarding expansion of an open enrollment program. The two sides have until July to reach a mutual agreement on a program or the law’s stipulation to expand coverage to a minimum of 2,500 District residents goes into effect.

This story originally appeared in the June 2009 print edition of Insurance & Financial Advisor.