Blue Cross at crossroads Private windfall?: Legislature must decide on nonprofit's change to stockholder firm

September 30, 1995

FOR DECADES Maryland Blue Cross raised high its banner of "nonprofit insurer" while reaping hundreds of millions of dollars from state tax breaks, from trusting subscribers and their employers, and from preferential treatment by the state insurance commissioner.

Now it wants to use that protected status as Maryland's largest health insurer to become a for-profit company, with its income going to private stockholders.

This major change, affecting some 1.3 million Marylanders, deserves full public discussion and scrutiny. Indeed, it requires extensive review and debate by the General Assembly, whose laws govern the Blue Cross charter.

Now is the time to establish a legislative task force to examine the extensive technical matters and broad ramifications of this fundamental change for health insurance in the state. That task force groundwork would provide the basis for a full discussion by the General Assembly when it convenes next year.

At stake are many millions of dollars in assets that Maryland Blue Cross has accumulated from years of public tax and legal benefits. Should they go to a public trust in compensation, or for sale to private stockholders?

In California, where that state's Blue Cross is making the same transition, $3 billion will go to heath charities, Sun reporter John Fairhall pointed out. Maryland's insurance commissioner, Dwight K. Bartlett III, believes these assets should remain with the new Blue Cross.

Maryland does not need to scrupulously copy the California example. But its citizens deserve more than an agreement reached behind closed doors by the company and its regulator, followed by a pro forma "public hearing".

That's similar to what happened a decade ago when a previous insurance commissioner forged the merger of Blue Cross and Blue Shield and privately promoted a management change. Instead of promised efficiencies, policyholders "benefited" from luxury sports skyboxes, junkets to Europe and other perks lavished on Blue Cross executives and their cronies. Huge financial losses that were made up by subsequent premium increases.

Rebuffed by Mr. Bartlett and the legislature earlier this year, Blue Cross has been quietly working with the commissioner, a few top lawmakers and the governor on a privatization plan that would avoid official dissent. That's contrary to the public interest. Full disclosure and in-depth legislative review is required.

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