Healthy or unhealthly Blues?

July 15, 1992

Disturbing questions about the operation of Blue Cross and Blue Shield of Maryland raised by the state insurance commissioner need to be answered. And the sooner, the better.

In congressional testimony, Maryland Insurance Commissioner John A. Donaho made a number of troubling charges concerning the activities and financial viability of Maryland's largest health insurance organization. Officials of the company say they are baffled by Mr. Donaho's sudden and unexpected outburst.

Although four years ago the Maryland Blues came perilously close to insolvency, the organization's financial condition has improved markedly, according to its own financial statements. Mr. Donaho, however, painted a dark financial picture. He said many of the Maryland Blues' for-profit subsidiaries have been losing ventures and have drained the organization of needed capital. Blue Cross and Blue Shield executives have said they have either sold or closed down all their losers. They claim they are making money and infusing the organization with capital.

Mr. Donaho also said the corporate perks -- such as sky boxes at the baseball stadium, a hospitality tent in the Preakness infield and a corporate membership at the posh Caves Valley Golf Club -- are inappropriate. Moreover, he said executive pay is way too generous for a non-profit organization whose purpose is to provide health care at the lowest possible cost.

His troubling testimony was delivered before a subcommittee of the Congress in Washington, not before the state legislature in Annapolis. Mr. Donaho complained that when he or prior insurance commissioners tried to exercise regulatory oversight of the Maryland Blues operations, the company has "thwarted" those efforts.

The memory of the state's 1985 savings and loan crisis should still be fresh in the minds of state officials. Maryland taxpayers had to foot the bill for false industry assurances that dozens of high-flying savings and loans were in strong financial shape. We cannot afford a repeat performance.

Mr. Donaho's office has been starved for funds for years. It badly needs money so that more examiners and actuaries can be added. Insurance companies have indicated a willingness to pay special levies for this purpose, but state legislators have balked. That must change. Mr. Donaho should be given strong backing from the governor and top legislators to conduct comprehensive examinations of the state's insurance companies -- without interference from the industry or its friends in the General Assembly.

The Maryland Blues have not had an opportunity to respond to all these allegations, and the organization deserves that chance. Maryland citizens, both as subscribers and as taxpayers, are owed a full airing of the issues and some clear and immediate answers to Mr. Donaho's sweeping allegations.

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