CareFirst plans to absorb premium tax.

The Baltimore Sun Knight Ridder/Tribune Business News

Feb. 22--Health insurer CareFirst BlueCross BlueShield said yesterday it will absorb a 2 percent premium tax on HMOs -- imposed to help solve a medical malpractice insurance crisis -- rather than pass it on to its 330,000 Maryland members.

CareFirst, the state's largest health insurer, said it had decided to absorb the roughly $13.7 million, after-tax cost this year in an effort to help keep health insurance affordable. A rate increase would have cost a typical family of four about $200 annually, CareFirst estimated.

"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, said in a statement.

The insurer, which has been trying to improve its image with Annapolis lawmakers, had previously indicated that policyholders would likely have to bear the cost of the tax.

The HMO tax became a political hot potato last month when Mid …