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Department of Insurance, Securities and Banking Reacts to Today’s Appeals Court Ruling

Thursday, September 13, 2012

Department of Insurance, Securities and Banking Reacts to Today’s Appeals Court Ruling

The department is now reviewing the amount of the nonprofit’s surplus for 2011 as required by city law.

The DC Court of Appeals ruled today that the Department of Insurance, Securities and Banking erred in the method it used to find that Group Hospitalization and Medical Services Inc., a unit of the nonprofit health-insurance company CareFirst BlueCross BlueShield, did not have “excessive” surplus by not considering the requirement to engage in community investment. The department is now reviewing the amount of the nonprofit’s surplus for 2011 as required by city law. It has already omitted from its new review process the methodology that the appeals court judge criticized. The judge said the department erred when it concluded CareFirst’s surplus was a reasonable size and the department consequently did not go on to consider the nonprofit’s obligation to invest a reasonable portion of that surplus in the community to the “maximum feasible extent” without hurting the nonprofit’s “financial soundness and efficiency.” The DC Appleseed Center for Law and Justice Inc. appealed the department’s original ruling, which occurred under a previous administration. The department has already invited Appleseed, CareFirst and the public to comment on its new work plan for evaluating the company’s use of its surplus.