The Real State of the Blues

July 17, 1992

Blue Cross and Blue Shield of Maryland has an opportunity to clear the air when its officials appear before the House Economic Matters Committee on July 28. State Insurance Commissioner John A. Donaho has made a number of troubling statements about the management of the Maryland Blues and his inability to effectively regulate the non-profit organization, which provides health insurance to almost half of the state's citizens.

Determining the true financial condition of Maryland Blue Cross is an issue that deserves immediate attention. There seems to be a wide difference of opinion between the insurance commissioner and Carl J. Sardegna, the chief executive officer of the Maryland Blues. Mr. Donaho told the U.S. Senate Permanent Subcommittee on Investigations he was concerned about the insurer's solvency. Mr. Sardegna called those comments "irresponsible" and pointed out his organization posted profits during the past three years.

Another issue that deserves attention is Mr. Donaho's assertion that his efforts to effectively regulate the Maryland Blues have been thwarted. Given its serious responsibility of regulating very large insurance companies, the Insurance Division has been seriously shortchanged by the governor and the legislature. Insurance companies volunteered to pay a special levy for examinations, but it was rejected by the legislature. That offer should be renewed.

Equally important, the insurance commissioner should be allowed to conduct his duties without interference from other parts of government. Mr. Donaho said the Schaefer administration quashed an effort to undertake a comprehensive study, which the General Assembly ordered in 1990, of the Maryland Blues. Rather than allow the independent study, the Blues hired their own consultant and commissioned their own confidential study. Mr. Donaho said he has received only an oral summary of the consultant's study and has yet to receive a written copy.

Clearly, this is unacceptable. West Virginia's Blue Cross failed in 1990; there are reports that 29 percent of the nation's Blue Cross plans are in poor financial shape. State regulators should have access to all the materials they need to carefully monitor Maryland Blue Cross and Blue Shield's condition, and to ensure its customers that the health-care company is sound and secure.

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