Markell Has Signed SB 146. Quietly. Very Quietly.
Virtually every day, we get at least one, and sometimes more, press releases from the Governor’s office, touting the signing of one piece of ‘landmark’ legislation after another.
Jack Markell is not the first governor to do this, it’s a time-honored tradition of giving oneself ‘the rub’ (wrestling term for putting someone over) and giving legislators ‘the rub’ as well.
However, like me, you may have missed that fact that, on July 12, 2011, Governor Markell quietly signed SB 146, which puts $170 million in reserves that are currently under the stewardship of BC/BS DE at risk. This is notable because BC/BS accumulated these reserves because of its putative not-for-profit status, a status conferred upon it by government. Meaning that these reserves were collected from Delaware policyholders. $170 million. Not-for-profit. Nothing says ‘not-for-profit’ quite like $170 million in reserves. Especially when the only ‘protection’ afforded the public is the keen oversight of dim bulb Karen Weldin Stewart, who, for all we know, may well be on the way to a big payday from the companies involved in this merger because she will provide next to no oversight.
In other words, no protection at all.
Unlike minor bills with overhyped signing ceremonies, this major bill with profound implications was signed under a cloak of secrecy. No phony ballyhoo, no flashbulbs going off, just a bunch of dishonorable ‘honorables’ skulking out of town for the summer after doing the bidding of insurance giants to the detriment of Delawareans. The sponsors of this bill were Senators Blevins and Simpson; Reps. B. Short, Gilligan, Hocker and D. Short. The bill was signed by Governor Jack Markell.
Remember those names if (more likely ‘when’) these $170 million in reserves migrate to undeserving parties. And remember that they didn’t even want you to know that this bill had been signed.
Now you know.
Tags: Karen Weldin Stewart; Delaware General Assembly; Steve Tanzer; El Somnambulo;
What does, “at risk” in the post mean? I looked for clues in the synopsis, but now I’m more confused.
I use ‘at risk’ because, while AG Biden wanted to include statutory safeguards preventing, for example, transfer of reserve funds from BC/BSD to that Pittsburgh company with which BC/BSD wants to merge, SB 146 merely requires a sign-off from (wait for it) Karen Weldin Stewart or her successor to allow such funds to be transferred.
And that’s not even talking about the proposed golden parachutes.
Here is a far more articulate explanation than mine. From (I hope) our next Insurance Commissioner, Mitch Crane:
The proposed amendment to existing law will serve to benefit only Highmark and the executives of BCBSD. The following is an op ed I submitted to the NJ. It has not been printed. Since I wrote the article last Thursday, the Pittsburgh newspapers confirmed by worst fears-Highmark needs Blue Cross’ reserves to buy out a failing hospital system in Pittsburgh-West Alleghany Health System!:
I had the pleasure of testifying in the Delaware Senate Insurance Committee’s hearing of a bill intended to amend Delaware Code (Title 29, Section 2531) in order to strip the Attorney General of his power to protect BCBSD’s reserves of over 175 million dollars if the Insurance Commissioner allows Blue Cross to merge with Highmark, Inc, a Pittsburgh-based insurer.
While all the testimony offered in favor of this last-minute and almost under the radar bill was given by paid attorneys and lobbyists supporting the merger, I spoke as a private citizen paid by no one, answerable to no one. I also spoke as a former Department of Insurance professional, having left the DOI in January as its Regulatory Specialist and Director of Consumer Services. In those capacities, under two Commissioners, I developed the expertise necessary to know that this bill, if enacted, may result in Delaware losing control of its major health insurer, and with it, 175 million dollars in reserves-dollars paid by Delaware policy holders.
As a practicing attorney for over 30 years, and as a former judge, I have learned to weigh arguments of opposing sides by looking at the logic offered and understanding what each party has to gain or lose by its assertions.
BCBSD and Highmark support stripping Attorney General Biden of the power to require these reserves be placed into a foundation for Delaware citizens because, without the reserves, the merger deal may not go through. But, they also argue that if the merger is approved, the reserves will remain in Delaware. Why pull out of a deal over money you do not want?
BCBSD argues that it needs to merge with the much-larger Highmark because it needs to upgrade its computer system in order to “compete with large national health insurers”. Yet, Insurance Commissioner Stewart has asked the federal government to exempt the two largest national health insurers doing business in Delaware ( Aetna and United Health Care) from new federal standards because otherwise “they will leave the state”. Where is the competition then?
Blue Cross’ reserves are 10 times the minimum set by the National Association of Insurance Commissioners (NAIC). Having reserves TEN TIMES that standard is unnecessary, especially at a time when there have been huge premium increases for Delawareans in individual and small-employer plans. In a hearing I conducted with then Commissioner Matt Denn as the hearing office in 2007, the then-vice president of BCBSD stated that its violations of Delaware law requiring the payment of “clean claims” was a result of its need to upgrade its computer system. I asked Mr. English the cost and his answer was 17 million dollars. Allowing for inflation and increased costs, certainly the upgrade needed to keep BCBSD competitive against its competitors (who when all are combined have a smaller share of the Delaware market than Blue Cross does) would require the expenditure of less than one-third the reserves.
These reserves also serve to make the proposed merger of BCBSD with Highmark more attractive- for Highmark. If BCBSD argues it needs the merger to survive, why does Highmark need our Blue Cross? Large companies do not gobble up small ones to keep the small ones from dying. They do not do it due to a sudden pang of conscience. They do it for the assets! The asset that Blue Cross has is its reserves! As evidence of this I point to the front page banner story in the June 3rd edition of the Pittsburgh Post-Gazette. That paper reported that Highmark may be unable to renew its contract with its largest provider-the University of Pittsburgh Medical Center. UPMC has its own health plan and is unwilling to renew with Highmark on Highmark’s terms. Highmark’s only viable option in its home market is to buy West Penn Allegheny Health System-the only real competition to UPMC. Yet, West Penn lost 22 million dollars in the first quarter of 2011 alone. This nearly 88 million dollar a year loss trend, combined with the cost of buying West Penn means that Highmark needs to find the assets necessary to make the deal. Though it has nearly a billion dollars in its own reserves (in a market serving 10 times the people as BCBSD) it cannot draw down its own reserve money without approval of Pennsylvania regulators. Highmark needs BCBSD because Highmark needs the reserve money paid to Blue Cross by Delawareans. How is this good for BCBSD or for Delaware?
If this senate bill is enacted in the waning days of the legislative session, it will strip the citizens of the protection the attorney general has within his authority to offer through protecting the assets of non-profits. Though Highmark is also a not-for-profit corporation, its greatest growth is in its for-profit subsidiaries. While the Insurance Commissioner would still have to approve a merger, and could impose reasonable conditions, there is no guarantee in law that this commissioner or a future commissioner will act in the best interest of the policy holder. Attorney General Biden must retain the power current law gives him.
I missed this signing. It makes me wonder if there is not a conversation going on behind the doors at leg hall to where jobs will be preserved if the merger is allowed to proceed with the reserves put in jeopardy.
Jack is much more at risk himself if we bleed many more chunks of hundreds of jobs and how that will appear in a high profile news article than if the non-profits engage in bleeding out these long-held reserves.
A few other little-observed discrepancies in the shining Markell star are his successful trampling of the poor’s access to eyecare through Medicaid and local school districts’ being forced to pick up significant costs in transportation next year.
BCBSofDE does need to merge with a bigger carrier, and it will. The politicos have been fighting over who will enjoy the spoils since the last deal with BCBSofMD, which failed thankfully. The successor company should get none of the cash. The company should be sold/merged based on what the policies/groups are worth. Last time around you had Jules, or whatever his name was, slated to get a mutimillion dollar severance package. You won’t see that this time. But all the state agencies want that cash, INCLUDING the AG office. And you can rest assured it will not go to HEATH CARE FOR THE POOR even if the DEMS decide its fate.
If BCBSD and Highmark executives are going to make an ass load of money if KWS does the wrong thing, then I’m sure they gave the Champagne on ice.
Blue Cross surplus climbs to $181M, up 48% since ’08
Posted on July 20, 2011 by Jonathan Starkey
Blue Cross Blue Shield of Delaware — along with most other nonprofit Blues plans nationwide — continued to pad its surplus in the first quarter of 2011, helped by customers who are still skipping doctor visits.
Delaware’s Blue Cross plan socked away $8 million into its reserve pot between December and March as it pursues a merger with Pittsburgh-based insurer Highmark Inc., according to an analysis by Citi insurance analyst Carl McDonald. The Delaware insurer now has a pot of money worth $181 million, 10 times above state regulatory requirements and about three times above requirements set by the national Blue Cross Blue Shield Association.
Under terms of the Highmark takeover, Blue Cross will cede control of its operations, and the use of its reserves, to Highmark.
Excess capital at Blue Cross plans nationwide has reached $29 billion, up from $18 billion at the end of 2008. The level of the local plan’s surplus exceeds the nationwide average, and the pot is 48 percent richer than it was at the end of 2008.
Blue Cross’ reserves were the subject of last-minute legislative maneuvering last month. Attorney General Beau Biden ruled that Blue Cross must set aside some of its reserves to fund a foundation for needy Delawareans as a condition of its merger with Highmark. A bill introduced by Senate Majority Leader Patricia Blevins, a Democrat, performed an end-run around that rule, allowing the Highmark deal to proceed.
In the last several months, Blue Cross has sought rate increases as high as 17 percent for the individual market, even as underwriting margins increased 2.1 percent in the first quarter, according to McDonald’s report. Blue Cross plans nationwide have benefited by consumer habits. People continue to skip doctors appointments and medical services as the economy mounts a sluggish recovery.
“Since utilization has yet to bounce back, and not much business renews in the second quarter, the financials are likely to get even better,” McDonald said.
Wow! The Legislature passes a Bill with huge bi partisan support, The Guv inks it in the dark of night. Both shoved it up the Fortunate Son’s end zone and what’s the upshot? It’s all blamed on one woman. What power she has! Methinks that St. Karen of Arc needs to hide the matches and get thee to a Nunnery to plan her counter attack!
If the one woman had said no, it would have kept the pen out of the governor’s hand. But Markell has plenty to answer for as well — perhaps more than she does. The true upshot is that the health insurance for hundreds of thousands of Delawareans will no longer have to answer to the Delaware insurance commissioner. Decisions on our health care will now be made in Pittsburgh.
They all have a lot to answer for. $170 million ain’t no joke regardless of what the ‘Pope’ sez.
The (cruel) joke is that this clueless failure controls the fate of that amount of policyholder reserve. And that the Governor and craven legislators gave her that power.
Geezer is right. Markell has a lot to answer for on this one. A veto would have effectively doomed this bill as there’s no way the House was going to call itself back into session to override.
For all the pathetic Karen defenders: It’s not about Karen. It’s about the policyholders she is sworn to protect. It’s not about her not being named Homecoming Queen in 1965.
Except that it is. An officeholder is more obsessed about proving something to herself and everybody else than she is in protecting the public’s interest. She’s not the only elected official to feel that way. Just currently in Delaware the most dangerous.
xxx
Where did Just Some Guy’s comments go? Why were they deleted?
Do I get a contact to call that will take my post off the thread when I screw up and reveal to all my old alias and/or true name like “Just Some Guy”?
Fair is fair and the courtesy should be extended to all if that is the policy here.
note to the adults on this thread:
can one of you please make sure we, the public, the little guy, gets kissed before we get screwed??
thank you
Anon: There’s an “edit” feature that lets you change it yourself. That might be what JSG did.