Merger of Blues requested without costly stipulations Union is needed to compete, Jews says

November 11, 1997|By M. William Salganik | M. William Salganik,SUN STAFF

William L. Jews, chief executive of Blue Cross Blue Shield of Maryland, asked state insurance regulators yesterday to approve a business consolidation with the District of Columbia Blue Cross plan without imposing "costly and unnecessary" conditions.

His comments came at the end of the second and final hearing on the consolidation plan before Steven B. Larsen, Maryland's insurance commissioner.

Consultants and consumer groups have asked the regulators to impose conditions on the Blue Crosses' affiliation to ensure adequate regulatory control and to protect charitable assets if the two later convert to for-profit status.

Several consumer groups also requested a moratorium of two to four years on for-profit conversions.

For example, Richard Bruning, president of the Maryland Universal Health Care Action Network, warned at yesterday's hearing, "Unless it is clearly demonstrated that adequate regulations currently exist to oversee potential conversions from a holding company to a for-profit company, we can only view a favorable decision on the holding company as facilitating for-profit conversion."

Jews said the comments from consumer groups were "generally well-intended, but it is clear some have lost the focal point" of the proposed transaction. He said the combination with D.C. Blue Cross is "the single best way to accomplish the growth we both must have" to compete against commercial insurers.

He also warned regulators against "writing prescriptions for an illness that may never occur."

"Don't place us in a position of not being competitive, and not being in a position to be creative in the future," he said.

In particular, Jews opposed incorporating a new holding company, which would control both the Maryland and D.C. plans, as an insurance company to ensure control by insurance regulators. KPMG Financial Services Consulting, advising the Maryland commissioner, has proposed such an arrangement and several consumer groups endorsed it at yesterday's hearing.

John A. Picciotto, senior vice president and general counsel for the Maryland Blues, testified that incorporating the holding company as an insurer could have "significant tax consequences." He also said it is unnecessary, since insurance regulators would already have "explicit and extensive" authority under state law and could specify areas of oversight as a condition of an order approving the consolidation.

Pub Date: 11/11/97

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