Carefirst Will Absorb Maryland Premium Tax

February 23, 2005

CareFirst BlueCross BlueShield has announced that it will absorb the 2 percent premium tax passed by the Maryland legislature in January to help pay for medical malpractice insurance assistance rather than pass along the cost to the 330,000 members of its HMO plans.

“Our directors determined that our overall financial status, market conditions, trends and forecasts allow CareFirst to make this commitment to keep HMO premiums more affordable for our members in 2005,” William L. Jews, CareFirst president and chief executive officer, said.

“We are pleased to be able to take this action and are hopeful that future market conditions make it possible for us to continue to moderate premiums.”

Three other HMOs — Mid Atlantic Medical Services Inc., Aetna Inc. and Kaiser Permanente — are raising rates on either March 1 or April 1.

Lawmakers levied the 2 percent tax on HMOs, which were previously exempt from the premium tax, to defray the cost of a plan to help pay for malpractice insurance and to increase payments to doctors for some services provided through the Medicaid program. Democrats passed it over the veto of Gov. Robert Ehrlich, a Republican.

Democratic leaders said the CareFirst announcement vindicates their position that insurers could absorb some or all of the tax increase.

“The Ehrlich administration called it economics 101 when Aetna and Mamsi passed on the cost of the loophole closing,” Senate President Thomas V. Mike Miller, D-Calvert, said. “I think this demonstrates that CareFirst understands leadership 101 and responsibility to the public 101.”

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Topics Maryland

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