Official defends Blues plan Insurer wouldn't have to share profits in sale of stock, Bartlett says

September 26, 1995|By John Fairhall | John Fairhall,SUN STAFF

Facing questions from the governor's office and skepticism from a former insurance commissioner, State Insurance Commissioner Dwight K. Bartlett III yesterday strongly defended HTC his handling of nonprofit Blue Cross and Blue Shield of Maryland's proposal to sell stock.

Blue Cross is expected to propose a plan next month that would divide the company into nonprofit and for-profit businesses.

Consumer advocates, lawyers and some state officials say the public should profit from stock sales because it has granted the company valuable state and federal tax breaks. The stock sales eventually could generate hundreds of millions of dollars, depending on the specifics of Blue Cross' plan.

But Mr. Bartlett disagrees, saying that only current subscribers are entitled to some benefit, perhaps in the form of reduced premiums.

The commissioner came under increased fire yesterday in the wake of an article in The Sunday Sun about how Blue Cross of California was required to contribute $3.2 billion to charitable foundations as the price of converting to a for-profit company and selling stock.

The article noted that if Mr. Bartlett's view prevails, the public in Maryland may not receive a dime.

Mr. Bartlett also is being criticized for holding private talks with the company for months to help it develop its proposal to restructure and sell stock. Responding to the criticism, a top gubernatorial aide said yesterday that he will meet with Mr. Bartlett this week to discuss his handling of Blue Cross' proposal.

"The governor's office is interested in the policy issues that have been raised," said Steve Larsen, legislative affairs officer for Gov. Parris N. Glendening. "We haven't had as much communication as we would like with the commissioner's office, and haven't been told much detail" about the company's plan and his [Mr. Bartlett's] talks with the company.

Former Insurance Commissioner John A. Donaho yesterday questioned Mr. Bartlett's opinion that the public already has benefited from the company's tax breaks. "I would argue that that money has already been distributed back to the public in terms of lower premium rates," Mr. Bartlett has said.

But Mr. Donaho said he doesn't recall any "rate adjustments as a result" of tax breaks and urged Mr. Bartlett to do more research on this issue.

"These issues should be publicly aired with ample time before any decision is rendered," added Mr. Donaho, who was commissioner until April 1993 and now is a consultant.

Shelli Craver, head of Maryland Citizen Action, a 50,000-member consumer advocacy group, echoed that view. "We need to open this process right now to find out what's going on beyond these closed doors," she said. "The public has an incredible stake in the outcome of this process."

Frances Phillips, Anne Arundel County's health officer, said more money is needed for health care.

"An endowment of a foundation is a very creative way, as in California, to maximize the good that can be done on behalf of a population."

Mr. Bartlett said he will do what California regulators did and hire outside experts on investment banking and accounting to advise him on the value of the assets and insurance business that would be turned over to the for-profit company.

Blue Cross Vice President Ann Gallant said the company "will not approve any plan which does not appropriately compensate the subscribers for the value of the assets which might be transferred. There are a number of ways to do that, and we are working with the insurance division to evaluate and assess those alternatives."

And, she said, "There will be ample opportunity for public comment."

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