The agreement allowing the state insurance commissioner access to the financial records of Maryland Blue Cross and Blue Shield's profit-making subsidiaries is welcome. But it is long overdue. To effectively regulate the state's largest health insurance company, the commissioner should be able to examine these subsidiaries as soon as they are created.
Although the Maryland Blues' managers correctly think of their organization as a business, it doesn't have the built-in accountability normally found in American corporations. It is a non-profit organization. There are no stockholders. The organization's management plays an important role in the selection of its board of directors. There is no one in the organization's structure who looks out for the interest of the subscribers and the citizens of Maryland, who are its beneficiaries. Given the absence of disinterested supervision within the organization, oversight must be taken up by outsiders. That job belongs to state regulators.
Close supervision is also necessary because Blue Cross is changing its mix of business. The Blues are moving away from their traditional business of writing risk-based health insurance. They own three health maintenance organizations, managed-care companies and other for-profit subsidiaries. Blue Cross claims these subsidiaries generate profits that allow it to fulfill its obligation as insurer of last resort. But until the insurance commissioner can see for himself, that is only an assertion.