DC Blue plan denies having excessive reserves

Last month, DC-based Blue Plan CareFirst BlueCross BlueShield was sued by Washington, D.C. officials, who claimed by that the non-profit plan should be making larger charitable contributions to the community. Since 2005, CareFirst has given $131 million in charitable contributions, including $69 million in Maryland and $62 million in D.C. But Washington's Attorney General's Office, which noted that the plan's D.C. affiliate, Group Hospitalization and Medical Service, had $754 million in reserves at the end of 2007, argued that the plan should be making $100 million in charitable contributions to the community every year.

Now the plan is pushing back, arguing that the $1.27 billion in reserves it has accumulated across its three affiliates are being used for $400 million in IT improvements and to protect it against unexpected financial losses. CareFirst representatives said that it needs to keep particularly large reserves because unlike for-profit entities, it can't sell stock to improve its cash position if financial problems arise. The company set aside 869 percent of premium revenue in 2007, a number that company representatives say is average compared with 36 other nonprofit Blue plans.

To learn more about the dispute:
- read this Baltimore Business Journal piece

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