Feisty state insurance commissioner takes on Blues

August 02, 1992|By Suzanne Wooton | Suzanne Wooton,Staff Writer

They say John Donaho was mad as hell and not going to take it anymore. But, until the federal subpoena landed in his lap, Maryland's bulldog-like insurance commissioner felt he was losing many of his scraps with Blue Cross-Blue Shield of Maryland.

Once his chance came to testify under oath July 2, he showed up snapping at the state's largest health insurer, charging that -- the trusted Blues had shown "a wanton disregard for its obligation to Maryland residents."

The company, he said, had thwarted regulatory authority, venturing in profit-making schemes that "failed abysmally." On top of that, he told the committee he was worried about the insurer's solvency. In short, Mr. Donaho said, one of the state's most politically connected institutions was ripe for investigation.

Within days, his testimony sparked a chain reaction. A legislative committee in Annapolis called a hearing to help reassure some 1.4 million Marylanders that their health insurance was sound. The Blues, crying that Mr. Donaho acted irresponsibly, immediately waged an aggressive public relations campaign and welcomed the opportunity to tell their side in Washington. And the Schaefer administration quietly began trying to play down his remarks.

While the commissioner -- once described as "part leprechaun, part magician and part bulldog" -- testified under oath, critics charged that he went too far.

"When Sen. Sam Nunn subpoenaed him, it threw him into overdrive," said Del. Casper R. Taylor Jr., a Democrat from Allegany and chairman of the House Economic Matters Committee, which oversees insurance matters. "His testimony was explosive and inflammatory."

In an interview last week, Mr. Donaho defended his actions.

"They think I'm a loose cannon for going down to Washington," he said. "Had I not been subpoenaed and not under oath, I would not have said it. No regulator discusses a potentially troubled company in public."

Still, the Senate hearing apparently was not an unwelcomed occasion for the feisty commissioner. By the time the Maryland panel held itsown session Tuesday, he had in hand an unprecedented agreement with the Blues requiring the insurer to turn over information, including financial data about subsidiaries and executive salaries, that Mr. Donaho says he had sought unsuccessfully.

And the Maryland Blues were pushed to the forefront of the Senate panel's sweeping national investigation into Blue Cross and Blue Shield plans with a two-day hearing on the Maryland plan set for September.

Some politicians as well as state officials say Mr. Donaho's stinging testimony not only reflects his legendary independence but also his simmering frustration about the Blues and their political influence in Maryland.

"He was frustrated with Blue Cross Blue Shield's attitude that says historically we've enjoyed great institutional power, that we've had a political presence in the state and we don't have to pay too much attention to the insurance commissioner," said Del. Timothy F. Maloney, a Prince George's Democrat who is chairman of the Appropriations subcommittee that handles insurance issues.

"That really frosted him."

Mr. Maloney said: "He's not a personally ambitious man. At this stage in life, he doesn't give a damn; in fact, he never did. He just feels he has a job as a regulator and he was being impeded."

A short, heavyset man, Mr. Donaho is confident, many say cocky. ("He struts when he's sitting down," said Senate President Thomas V. Mike Miller). Gruff, yet witty and personable, Mr. Donaho appears to care little about whose feathers he ruffles.

"He just comes straight at you. He just says, 'I think you're wrong and here's what I want to do,'" said Sen. Thomas P. O'Reilly, chairman of the Senate Finance Committee. "The impression he leaves is 'I'm not beholden to anyone.' "

A colorful speaker, Mr. Donaho frequently captures attention with a quick retort. When told two years ago that Blue Cross and Blue Shield of Maryland was hiring its own consultant to conduct a management study, rather than to submit to one paid for by the state, Mr. Donaho wryly replied:

"In the Bible, St. Paul asks, 'Can a man examine himself?'"

A longtime trouble-shooter for Gov. William Donald Schaefer, Mr. Donaho is viewed as one of the few Schaefer confidants who has little hesitancy about telling the sometimes volatile governor exactly what he thinks.

At 74, with a distinguished resume, the commissioner seemingly has nothing to lose.

"I'd just go and do something else," Mr. Donaho says. He remains commissioner, he says, because he sees no candidates on the horizon who can do the job.

After all, Mr. Donaho did the governor something of a favor in 1989 by accepting the job as commissioner at a time when the the state's Insurance Division was under criticism as ineffective and ill-equipped.

Nevertheless, sources say his testimony in Washington blindsided the governor, who reportedly knew little, if anything, about what the commissioner intended to say.

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