Senate OKs bill requiring Blues to set aside money Fund would cover unexpected claims STATE HOUSE REPORT

April 07, 1993|By John W. Frece | John W. Frece,Staff Writer

Four days after the state insurance commissioner complained about amendments to the Blue Cross regulation bill, the state Senate unanimously passed a version more to the commissioner's liking.

Overruling one of their own committees, senators voted to require nonprofit insurers such as Blue Cross and Blue Shield of Maryland to set aside a specified sum of money as a hedge against unexpected claims or losses.

"That was really the biggest concern: to make sure we have adequate [protection for] solvency," state Insurance Commissioner John A. Donaho said afterward.

The bill now goes to the House, where delegates are expected to reject other Senate amendments -- many of which were added to the bill at Blue Cross' request -- that both the delegates and Mr. Donaho believe still weaken the bill.

That rejection would send the legislation to a six-member conference committee to iron out differences before the 1993 General Assembly adjourns at midnight Monday.

"We're close enough we can get into the conference and work out a bill," predicted Delegate Casper R. Taylor Jr., D-Allegany, chairman of the Economic Matters Committee. "It's a very important bill and I feel quite confident we're going to pass it."

Yesterday's fight was over a Finance Committee amendment that sought to change a provision in the House bill. The House language states that nonprofit insurers such as Blue Cross must, in four years, have on hand a surplus equal to 8 percent of their premiums, or enough to cover about a month's worth of claims. The Blues' current surplus of about $28 million would cover about 15 days worth of claims.

The committee's amendment, which Mr. Donaho said weakened the bill more than any other, would have given the insurance commissioner authority to set the surplus level above or below the 8 percent level.

"I believe it gives the commissioner authority the public doesn't want him to have," suggested Sen. John A. Pica Jr., D-Baltimore, who led the attack on the committee amendment.

"There ought to be an absolute floor -- not a rubber floor," agreed Senate Minority Leader John A. Cade, R-Anne Arundel.

A majority of the Senate also agreed, voting 26-20 to delete the amendment.

Both Mr. Donaho and Delegate Taylor said they still have concerns about other Senate amendments. Those would make it possible for the current Blue Cross directors to remain on the board longer, to live outside of the state, and to attend fewer board meetings. Another Senate change removes two "consumer members" the House wanted appointed to the Blue Cross board.

Last week, Mr. Donaho said he feared the Senate amendments had weakened the bill so much that the House would never go along. In a letter to Blue Cross president William L. Jews, Mr. Donaho warned that if the bill died, he would use his authority to require Blue Cross to maintain a surplus so large that it would drive the company into insolvency.

That, in turn, would probably lead to a state takeover of the company that handles health insurance for some 1.4 million Marylanders.

"I'm not entirely pleased with John," Gov. William Donald Schaefer said yesterday of Mr. Donaho's letter to Mr. Jews. "His threat to put them in bankruptcy, I don't think serves any purpose."

The governor has been unhappy with Mr. Donaho ever since the commissioner unexpectedly announced his concerns about the financial health of Blue Cross before the Permanent Subcommittee on Investigations of the U.S. Senate last summer.

"Since he's appeared in Washington, John, in my mind, has taken an uncooperative stance," the governor said. "I don't know who he thinks he is. He's the commissioner, but he's subject to the thoughts of the legislature and the governor."

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