District files suit against major insurance company

WASHINGTON - The District is suing the largest health care insurance provider in the Mid-Atlantic region, WTOP has learned.

The civil lawsuit was filed Tuesday in D.C. Superior Court by Attorney General Peter Nickles against CareFirst Inc., as well as Group Hospitalization and Medical Services (GHMSI), a local arm of CareFirst.

Local leaders say the organization has not complied with a federal requirement to provide charitable benefits to the region. D.C. Councilmember Mary Cheh, who will lead an investigation, says GHMSI has stockpiled $745 million.

Court documents filed by the District state that "under CareFirst's management and control, GHMSI achieved dramatic growth in capital without ever formally converting into a for-profit company."

From 1998 to 2004, the District says GHMSI's capital rose from $159 million to more than $500 million.

Cheh says that money could be used to lower rising insurance premiums and to provide a safety net for the uninsured. She says she'll use her subpoena power to get the company's records.

"I want to know why, in the face of rising insurance premiums, GHMSI is sitting on three-quarters of a billion dollars of surplus and paying fabulous sums to top executives?"

Cheh claims a former CareFirst CEO was paid $18 million in compensation.

Officials at Carefirst said in a statement they were "disappointed" the District is seeking this action.

"Last year alone, CareFirst contributed more than $32 million to benefit communities in D.C., Northern Virginia and Maryland," according to the statement.

CareFirst, Inc. is the not-for-profit, non-stock, parent company of CareFirst of Maryland, Inc. It serves nearly 3.1 million members, and has 5,400 employees in D.C., Maryland, North Carolina, northern Virginia and West Virginia.

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