House OKs tighter rules for Blues More restrictions forecast in Senate

February 24, 1993|By Tom Bowman | Tom Bowman,Staff Writer

A measure to tighten state controls over Blue Cross and Blue Shield of Maryland, which was rocked last year by disclosures of poor management and excessive spending, passed the House of Delegates yesterday.

By a 134-1 vote, the House approved a bill designed to provide stronger regulation of the state's largest health insurer, which serves about 1.4 million Maryland residents.

While the House measure was stricter than one proposed by state Insurance Commissioner John A. Donaho, some lawmakers speculated that even more controls would be added by the Senate.

The House bill requires the Blues to maintain a cash reserve equal to one month of premiums and forces it to disclose far more of its finances than previously required. It also restricts its business to health-related activities and adds two consumer members to the board.

"I think the biggest difference was we were a little tougher on the board of directors," said Del. Casper R. Taylor, D-Allegany, chairman of the Economic Matters Committee, after the House vote.

The House bill also lowered the maximum time a director can serve on the board to six years from the nine years proposed by Mr. Donaho. And unlike the commissioner's measure, the House bill would grant the two consumer members voting privileges. The board, which currently has 14 members, has four empty seats.

Mr. Taylor lauded other portions of Mr. Donaho's proposal retained in the House measure, including a key portion that would require the insurer to keep in reserve a minimum of 8 percent of its annual premiums, equal to one month's revenue. Also, all the company's subsidiaries have to be insurance-related. "They can't invest in supermarkets or shoe stores," Mr. Taylor noted.

"I think it's a good, substantial bill," Mr. Donaho said later, adding that the House bill "improved" his proposal.

John A. Picciotto, general counsel for the Maryland Blues, said the company supports "95 percent" of the House measure. But he hopes to have the Senate tighten the portion of the bill that allows the insurance commissioner to remove a company director or officer. The bill says the commissioner can act in the event of "unsound or unsafe business practices," said Mr. Picciotto, who termed the language too vague.

The company also opposes a provision in the law requiring all directors to be residents of Maryland. One board member, Joseph A. Califano Jr., former secretary of health, education and welfare under President Jimmy Carter, lives in New York, Mr. Picciotto said.

The sole delegate to vote against the measure, Leon G. Billings, D-Montgomery, said the bill didn't go far enough. "I think it probably reflected too much compromise," said Mr. Billings, who declined to offer specifics.

Sen. Thomas P. O'Reilly, D-Prince George's, predicted the Senate would "strengthen it even more," perhaps placing more restrictions on the board or the company's subsidiaries.

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