Washington, D.C. (Map, News) - The city  will move toward universal health care without the aid of insurer CareFirst, whose apparent withdrawal from the evolving Healthy D.C. initiative has angered city leaders and could spur legislation targeting its revenues.

Healthy D.C. was unveiled as a publicly subsidized partnership between the District and CareFirst BlueCross BlueShield, in which about 25,000 uninsured city residents would pay a small percentage of their income to get on the insurance rolls.

But CareFirst, the city’s largest insurer, had a “change of heart” and is no longer expected to participate, Councilman David Catania, chairman of the Health Committee, said Monday.

The loss is likely to erode the relationship between D.C. and the nonprofit insurer, which was chartered by Congress as a “charitable and benevolent institution” but has long been the target of critics who say it devotes few dollars to charitable care.

Its withdrawal from the partnership could result in legislation forcing CareFirst to turn over a percentage of its profits to benefit the community, Catania said.

He wanted to try a more “collegial, cooperative arrangement” with CareFirst, one that “doesn’t degenerate into a rock fight,” Catania said. If a community benefit bill is introduced now, he said, there will be “no voice of restraint” on CareFirst’s behalf.

CareFirst D.C., which collects roughly $2 billion annually in premiums and is sitting on $770 million in surpluses, was to put $5 million a year into the program, with the remaining dollars deriving from a doubled cigarette tax and an expanded health maintenance organization premium tax.

“This is at the very heart of what their community obligation is, helping people who can’t afford insurance get insurance,” said Walter Smith, executive director of D.C. Appleseed, which has studied CareFirst’s past charitable efforts. “For us, the fact that they’re refusing to even do that is illustrative of the need for a bill with teeth requiring them to fully meet their community benefit obligation.”

Catania said a new Healthy D.C. blueprint may call for an expanded version of the D.C. Healthcare Alliance, the city’s health care safety net. But without CareFirst’s $5 million, the new program could fall short of its goals.

A CareFirst spokesman declined comment Monday.

mneibauer@dcexaminer.com