CareFirst BlueCross BlueShield Announces $92 Million Plan to Fulfill Not-for-Profit Mission.

OWINGS MILLS, Md. -- CareFirst Reduces Projected Net Operating Income for 2005 by at Least $60 Million to Increase Affordability; Plans Major Patient Quality, Safety and Disparity Initiatives

CareFirst BlueCross BlueShield today outlined details of a $92 million-plus plan designed to help keep care affordable for its members and broaden CareFirst's regional role in improving health care accessibility, quality and safety. Under the plan - called CareFirst Commitment - CareFirst will:

--Lower CareFirst's operating earnings target by at least $60 million in 2005 from forecasted income from continuing operations for 2004 to stabilize premium costs, thus helping to increase affordability of health coverage for current and potential members throughout its service area.

--Continue to contribute $24 million to fund public-private programs that provide prescription drugs for low-income seniors in Maryland and to offer coverage for difficult-to-insure individuals in the District of Columbia.

--Invest $8.7 million in 2005 to launch new initiatives to encourage excellent physician care, improve patient safety, enhance hospital intensive care, partner with community organizations to address health care needs, and reduce racial and ethnic health disparities. As part of a three-year commitment, CareFirst is budgeting $20 million in 2006-7 on these initiatives.

"Simply put, our mission is your health. This strategy represents our pledge that CareFirst will be a leader in improving health care affordability, access, safety and quality in all of the communities we serve," said Michael R. Merson, Board Chair of CareFirst, Inc., the holding company that oversees Blue Cross and Blue Shield affiliates in Maryland, Delaware and the greater Washington, D.C. area.

CareFirst President and CEO William L. Jews explained, "Our net margins from operations in recent years already have been lower than those of most not-for-profit Blues Plans across the nation. We now are going one step further."

Jews continued, "Our 2005 financial plan sets a net earnings target and a pricing strategy that will afford more individuals the opportunity to obtain health insurance coverage, since it means that we can adjust pricing so as to achieve that lower income goal."

While final audited numbers are not yet completed, CareFirst forecasted a net operating income margin of about 3.5 percent of premiums and fees in 2004. Under the revised earnings target, net margins will drop to 2.2 percent in 2005.

Throughout 2004, the CareFirst Board's Mission Oversight Committee, working with the Board's Finance and Strategic Planning Committees, examined how best to meet the needs of its members while also addressing other pressing community health care needs. CareFirst Commitment is specifically designed to respond to those needs.

Sister Carol Keehan, who chairs the Mission Oversight Committee, said, "This commitment by CareFirst is an historic one. It strengthens our primary responsibility to the 3.2 million members who count on CareFirst for affordable, quality health care coverage, while reaffirming and expanding our role in improving the quality of care and the ability of people to access health care in all the communities we serve."

CareFirst Commitment encompasses three primary components:

1. Ensuring Affordability includes mitigating future prices and
   developing new, more affordable product options. Lowering
   operating income targets will enable CareFirst to keep health
   care more affordable for its members and make care more
   affordable for other groups and individuals.

2. Raising the Bar focuses on initiatives designed to improve care
   quality and patient safety. CareFirst becomes one of the first
   health insurers to partner with Bridges to Excellence (BTE) -
   a national, non-profit organization that encourages
   significant leaps in the quality of care - that will be
   launched early this year. The Bridges to Excellence program
   provides financial rewards to doctors who deliver Safe,
   Timely, Effective, Efficient, Equitable and Patient-centered
   care. In partnering with BTE, CareFirst will be joining such
   other groups as the National Coalition on Business Health, the
   National Committee for Quality Assurance (NCQA), and large
   employers who seek to implement a range of physician process
   changes designed to promote the delivery of safe, high quality
   care. CareFirst also is joining and committing funding to the
   Maryland Patient Safety Centers, in collaboration with the
   Maryland Hospital Association and Delmarva Foundation.

3. Closing the Gaps will help CareFirst better meet and respond to
   the health care needs of the increasingly diverse communities
   the company serves. Recognizing that racial and ethnic health
   disparities are becoming more prevalent, CareFirst's
   initiatives will include medical strategies to address the
   prevalence of cardiovascular disease in African Americans,
   diabetes among Hispanics and cervical cancer in Asian women.
   Other initiatives include translation and cultural outreach to
   serve diverse communities, development of products that meet
   specific community needs, and participation in a variety of
   existing public health programs.

In addition to programs managed by CareFirst's medical management staff, CareFirst will seek to collaborate with and fund initiatives by non-profit organizations that address health issues, including the Maryland-D.C. Health Information Technology Collaborative.

The company also committed to making $2.6 million in direct contributions in 2005 to charitable and non-profit groups throughout its market service area, an amount it plans to increase steadily in subsequent years.

"The Institute of Medicine has estimated that only 55 percent of Americans receive care recommended by national consensus clinical guidelines, resulting in poor health status and outcomes and up to $29 billion in unnecessary annual health care expenses," said Jon Shematek, M.D., Medical Director of Quality Improvement for CareFirst. "The Bridges to Excellence program offers the potential to reduce medical errors, improve the quality of care delivered to patients, and should over the long-term lead to reductions in the cost of care."

CareFirst will pay participating doctors who meet certain criteria set by NCQA as much as $50 additional annually for every CareFirst patient under their care plus their costs in being certified by NCQA. CareFirst has committed funding to cover as many 16,000 of its members being served by physician practices throughout the region.

"CareFirst is among the first health plans to take the lead on a large-scale BTE initiative," said BTE Board Chair Francois de Brantes. "It is a significant investment in improving the quality and safety of health care and we hope that other health plans will follow CareFirst's aggressive lead."

To support BTE and other mission-related activities, CareFirst has established and staffed new Offices of Patient Safety and Quality and Health Disparity.

Merson added, "Bridges to Excellence is just one example of the type of partnership CareFirst will forge to address patient safety and quality. It is one of many ways we will give meaning to the 'CareFirst Commitment' in the months and years to come."

In its 70th year of service, CareFirst, an independent licensee of the Blue Cross and Blue Shield Association, is a not-for-profit health care company which, through its affiliates and subsidiaries, offers a comprehensive portfolio of health insurance products, direct health care and administrative services to more than 3.2 million individuals and groups, and provides community support in Northern Virginia, the District of Columbia, Maryland and Delaware.

(To learn more about CareFirst BlueCross BlueShield, see our Web site at http:/www.carefirst.com)

To receive this news release electronically, call 1-800-914-6397.