Blues bill could be in trouble

March 25, 1995|By John Fairhall | John Fairhall,Sun Staff Writer

Signaling potential trouble for Blue Cross and Blue Shield of Maryland, some legislators warned yesterday that it may be too late to consider major legislation this year enabling the nonprofit health insurer to become for-profit and sell stock.

"I don't think the legislature wants to be rushed into making any decision of this magnitude affecting the health insurance" of Marylanders, House Economic Matters Committee Chairman Michael E. Busch said yesterday, alluding to the General Assembly's April 10 adjournment date.

The Anne Arundel County Democrat said it might be better for legislators to follow normal procedures and study Blue Cross' corporate reorganization plans after the session with an eye toward submitting legislation next year if necessary.

Mr. Busch spoke after he and other legislative leaders met privately with representatives of Blue Cross, the state insurance commissioner and the investment banking firm Alex. Brown Inc., which is helping plan a possible stock sale.

Company officials say they need to raise capital to bolster finances and compete more effectively. William L. Jews,

president and chief executive of Blue Cross, told legislators in late January that the company's long-term future is "threatened" if it doesn't obtain the financial wherewithal to grow and more business flexibility.

Last year, Blue Cross' enrollment dropped 3 percent, to 1.37 million. Although profits increased, revenue declined 2.4 percent, $1.9 billion.

House Speaker Casper R. Taylor Jr. said he told Blue Cross officials to return Monday with a draft of proposed legislation spelling out how the company -- the state's largest health insurer -- wants to proceed.

Mr. Taylor said he didn't know precisely what the company would propose or whether he'd support it. A company spokeswoman said Blue Cross is still weighing its options.

"I'm not supporting anything until a standing committee has heard [the proposal] and there's been a public hearing and we have some kind of consensus," he said.

Many legislators say they agree with Blue Cross officials that the company needs capital. "We want to give them all the tools so that they can compete," said Sen. Thomas L. Bromwell, chairman of the Senate Finance Committee and a participant in yesterday's meeting.

But the timing of the proposal, coming at the end of the legislative session, when it might seem the General Assembly is trying to ram through a controversial bill, worries politicians.

"Whether we do it this year is still up in the air," Mr. Bromwell, a Baltimore County Democrat, said, noting that the legislature also wants to "see what the governor thinks."

A spokesman for Gov. Parris N. Glendening, Charles F. Porcari, said Mr. Glendening "would consider any reasonable alternative as long as consumer protections are assured and rates are not adversely affected."

Opponents of a conversion to for-profit status say they would fight Blue Cross, but they'd have little time to prepare. A public hearing on the legislative proposal, which probably would be submitted as an amendment to an existing bill, would be held as early as Wednesday, legislators said.

A lobbyist for the state medical society, Joseph A. Schwartz III, said the 7,000-member doctors' group would oppose such legislation as "an end-run of existing law" that makes Blue Cross nonprofit.

Albert P. Cohen of Snow Hill, a member of Health Care for All, a consumer coalition, said "it's appalling" that the legislature might deal with such an issue at the tail-end of its session. "This is truly an issue that impacts so many Marylanders in such a major portion of their lives."

Doctors and consumer groups fought Blue Cross when it submitted a stock-sale plan late last year to Insurance Commissioner Dwight K. Bartlett III, who rejected the proposal in January as a violation of state law.

The doctors and consumers asserted that the company would put stockholders' interests above subscribers' concerns, disputing Blue Cross' contention that subscribers will benefit if the company can compete more effectively.

Among the issues facing the legislature and insurance commissioner is how to dispose of assets Blue Cross has built up as a nonprofit company. A California Blue Cross plan that converted to for-profit status was directed to place about $2 billion of assets into a charitable foundation.

Another issue is whether to permit Blue Cross officials to receive potentially lucrative stock options.

Mr. Bromwell said members of his committee are "uncomfortable" with that idea. He said he believes stock options are "off the table," meaning Blue Cross officials would not pursue them.

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