Review of state insurer ordered

Injured workers' fund criticized for granting large no-bid contract

Board, operations eyed

February 17, 1999|By Walter F. Roche Jr. | Walter F. Roche Jr.,SUN STAFF

Gov. Parris N. Glendening has ordered the creation of a task force to review the state Injured Workers' Insurance Fund, after its award of a multimillion-dollar no-bid contract.

In a letter made public yesterday, Glendening's chief of staff, Major F. Riddick Jr., disclosed that the task force will be asked to assess the structure of the fund's governing board and the agency's operations.

In the Feb. 15 letter to Montgomery Democratic Sen. Ida G. Ruben, Riddick wrote, "Recently, there have been concerns raised relative to several issues including the management of the agency itself." He said the panel would also review the state law "under which [IWIF] operates."

The letter was sent on the eve of a hearing before Ruben's subcommittee on the annual budget for IWIF, a state agency that provides workers' compensation insurance coverage for thousands of Maryland companies. The agency, run by a board appointed by the governor, competes directly with private insurance companies.

Ray Feldmann, a spokesman for Glendening, said the governor decided that the time was right for review. He noted that it has been about 10 years since the agency was given independent status by the legisla- ture. He said the task force would determine whether the law governing the agency needs to be changed.

Feldmann said the members of the task force would be appointed "as soon as possible." He said no plans exist to change the current membership of the board that oversees the fund's operations.

The Sun reported recently that an independent audit report concluded that IWIF failed to follow its procurement procedures in awarding a three-year, $21 million managed-care contract in 1996. IWIF's board recently voted to reject a proposal to extend that contract with Statutory Benefits Management Corp. for another year.

At the board's insistence, the agency in early January issued a formal invitation for companies to submit proposals to take over the management contract when the pact expires in June. Bids are due next month.

Daniel E. McKew, chairman of the IWIF board, said he was aware of the governor's review plans and was "fully in agreement." He noted that legislators had raised questions about the fund and its structure during a hearing last month in Annapolis. IWIF's president, Paul M. Rose, also was questioned at the hearing about the SBMC contract.

Questions raised by the legislators focused on the fact that IWIF, unlike private insurance companies, is not subject to regulation by the Maryland Insurance Administration and, as a state agency, does not pay taxes imposed on private insurers.

A bill before the House Economic Matters Committee would make IWIF subject to the same reviews by the state Insurance Commissioner that apply to private firms. It would also make the fund subject to the same taxes imposed on private firms.

Sen. Barbara A. Hoffman, chairwoman of the Budget and Taxation Committee, also questioned the SBMC contract during a hearing yesterday. She said that while she did not believe any laws were broken, IWIF should have followed its established procedures.

"There are ways to carry it out," Hoffman said after the hearing.

McKew noted yesterday that the board is conducting an annual evaluation of the performance of Rose, who is also IWIF's chief executive officer. He said that review would be completed in time for action at the board's meeting next month.

In recent meetings, some members of IWIF's board have been openly critical of some aspects of the fund's operations. At the January meeting, several board members questioned Rose on why the agency had exceeded its annual advertising budget by a substantial margin.

Specific questions were raised about a sponsorship and advertising arrangement with the Baltimore Blast indoor soccer team.

Pub Date: 2/17/99

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