Mr. John A. Donaho
Maryland State Insurance Division
501 St. Paul Place
Baltimore, Maryland 21202
Re: Blue Cross proposal for mutual conversion, August, 1990
Dear Mr. Donaho:
I am sorry I was not able to attend the hearing on Blue Cross' proposal to convert to a mutual insurance company. I read about the proposal and the hearing for the first time in the Evening Sun. I have been a Blue Cross individual subscriber for most of my life. My premiums are approximately $1200 per year and at this moment, I cannot afford routine (pap smear, mammography) outpatient care by reason of unemployment and underemployment. I am too wealthy for Medical Assistance.
There are several reasons I was not able to attend (and I think I share them with the general public): (1) I did not know that a hearing on the issue, especially of this significance, was to be held; (2) I do not know much about the insurance industry and how it works (To this day, I do not understand what a mutual conversion would mean.); (3) my hands are full with my volunteer job and trying to make a living; and (4) from experience, I know that it would have taken hundreds of hours of research and preparation to make a presentation and present arguments dealing with subject matters as complex as those discussed during the hearing.
I surmise it was for the reasons above that your agency only heard from representatives of the Maryland Hospital Association and the Maryland Pharmacists Association. It was not only in the interest of those interest groups to know of the hearing, but it is their purpose in being to monitor and be responsive to potential changes in their spheres.
In any event, I am writing to ask that your agency not act precipitously in deciding on Blue Cross' request. I attach a copy of a clipping from the July 13th, 1990 issue of the Baltimore Sun regarding a hearing before the U.S. Senate's Permanent Subcommittee on Investigations, which I believe raises questions on Blue Cross' quadruple roles as payor of overwhelming market dominance, claim processor and auditor for the Medicare program, and beneficiary when Medicare pays claims that might have fallen on Blue Cross itself.
By its relationships by way of the American Hospital Association and other health care corporations and entities, it is not difficult to see that Blue Cross may also have undue influences not only on the ways hospitals bill and process claims, but rates for different types of services. [A common situation that I have experienced personally is that of "coordinated" coverage - where the insured person has two "full" policies yet the contract(s) are written such that neither insurer pays the full amount promised by its policy by itself. The consumer doesn't even have a copy of the contract and would require a law degree to interpret it.]
It would seem to me that Blue Cross, contrary to being granted a conversion to mutual status, be in the alternative analyzed by competent independent auditors and/or management specialists. We must take into account the massive effect Blue Cross has on the health care system in general, not only with regard to its role in administrating, auditing and alternate payor with regard to Medicare, but how Blue Cross payment methods and contract provisions influence other companies with which they "compete" on the hypothetical "level playing field".
We must ask whether the possibility of impropriety exists when Blue Cross has access to a wide spectrum of patient databases in its capacities as payor, auditor and Medicare administrator. We must also delve further into the effect of Blue Cross' payment methods and overwhelming dominance in the Hospital market to discover where alternate insurers are handicapped by their less superior knowledge (or influence over) the nuances. (My Blue Cross "100% Policy" covers 100% of a hospital bill in a single line item on the "Explanation of Benefits" form. My other insurance company inputs about four pages of line-by-line items.) (My Blue Cross "100% Policy" covers precious little or nothing of physician, diagnostic or outpatient fees; a different policy I had through an employer was a straight 80% after a $350 deductible.) See also attached "Letter to the Editor" of the Baltimore Sunpaper.
In summary, dealing with the problem of Blue Cross may be like dealing with a lizard which has grown to be a dragon. Your agency should exercise every caution in granting any changes as they have impact far removed from the insurance industry itself.
Please advise me in the future if there are further requests of this nature from our largest insurer and insurer of last resort.
Sincerely,
Nancy Moran
nm
enclosures
cc:
The Honorable William V. Roth
United States Senate
James S. Rill, Esquire
Assistant Attorney General,
Antitrust Division
U.S. Department of Justice
The Honorable Catherine I. Riley
Presiding Chairman,
Health Care Cost Containment
Joint Oversight Committee
Maryland General Assembly