They say John Donaho was mad as hell and not going to take it anymore. But, until the federal subpoena landed in his lap, Maryland's bulldog-like insurance commissioner felt he was losing many of his scraps with Blue Cross-Blue Shield of Maryland.
Once his chance came to testify under oath July 2, he showed up snapping at the state's largest health insurer, charging that -- the trusted Blues had shown "a wanton disregard for its obligation to Maryland residents."
The company, he said, had thwarted regulatory authority, venturing in profit-making schemes that "failed abysmally." On top of that, he told the committee he was worried about the insurer's solvency. In short, Mr. Donaho said, one of the state's most politically connected institutions was ripe for investigation.
Within days, his testimony sparked a chain reaction. A legislative committee in Annapolis called a hearing to help reassure some 1.4 million Marylanders that their health insurance was sound. The Blues, crying that Mr. Donaho acted irresponsibly, immediately waged an aggressive public relations campaign and welcomed the opportunity to tell their side in Washington. And the Schaefer administration quietly began trying to play down his remarks.
While the commissioner -- once described as "part leprechaun, part magician and part bulldog" -- testified under oath, critics charged that he went too far.
"When Sen. Sam Nunn subpoenaed him, it threw him into overdrive," said Del. Casper R. Taylor Jr., a Democrat from Allegany and chairman of the House Economic Matters Committee, which oversees insurance matters. "His testimony was explosive and inflammatory."
In an interview last week, Mr. Donaho defended his actions.
"They think I'm a loose cannon for going down to Washington," he said. "Had I not been subpoenaed and not under oath, I would not have said it. No regulator discusses a potentially troubled company in public."
Still, the Senate hearing apparently was not an unwelcomed occasion for the feisty commissioner. By the time the Maryland panel held itsown session Tuesday, he had in hand an unprecedented agreement with the Blues requiring the insurer to turn over information, including financial data about subsidiaries and executive salaries, that Mr. Donaho says he had sought unsuccessfully.
And the Maryland Blues were pushed to the forefront of the Senate panel's sweeping national investigation into Blue Cross and Blue Shield plans with a two-day hearing on the Maryland plan set for September.
Some politicians as well as state officials say Mr. Donaho's stinging testimony not only reflects his legendary independence but also his simmering frustration about the Blues and their political influence in Maryland.
"He was frustrated with Blue Cross Blue Shield's attitude that says historically we've enjoyed great institutional power, that we've had a political presence in the state and we don't have to pay too much attention to the insurance commissioner," said Del. Timothy F. Maloney, a Prince George's Democrat who is chairman of the Appropriations subcommittee that handles insurance issues.
"That really frosted him."
Mr. Maloney said: "He's not a personally ambitious man. At this stage in life, he doesn't give a damn; in fact, he never did. He just feels he has a job as a regulator and he was being impeded."
A short, heavyset man, Mr. Donaho is confident, many say cocky. ("He struts when he's sitting down," said Senate President Thomas V. Mike Miller). Gruff, yet witty and personable, Mr. Donaho appears to care little about whose feathers he ruffles.
"He just comes straight at you. He just says, 'I think you're wrong and here's what I want to do,'" said Sen. Thomas P. O'Reilly, chairman of the Senate Finance Committee. "The impression he leaves is 'I'm not beholden to anyone.' "
A colorful speaker, Mr. Donaho frequently captures attention with a quick retort. When told two years ago that Blue Cross and Blue Shield of Maryland was hiring its own consultant to conduct a management study, rather than to submit to one paid for by the state, Mr. Donaho wryly replied:
"In the Bible, St. Paul asks, 'Can a man examine himself?'"
A longtime trouble-shooter for Gov. William Donald Schaefer, Mr. Donaho is viewed as one of the few Schaefer confidants who has little hesitancy about telling the sometimes volatile governor exactly what he thinks.
At 74, with a distinguished resume, the commissioner seemingly has nothing to lose.
"I'd just go and do something else," Mr. Donaho says. He remains commissioner, he says, because he sees no candidates on the horizon who can do the job.
After all, Mr. Donaho did the governor something of a favor in 1989 by accepting the job as commissioner at a time when the the state's Insurance Division was under criticism as ineffective and ill-equipped.
Nevertheless, sources say his testimony in Washington blindsided the governor, who reportedly knew little, if anything, about what the commissioner intended to say.
Mr. Donaho says that the governor met with him several times after the hearing, but he denied rumors that Mr. Schaefer was infuriated with him.
"The governor was just sensitive to the fact that he didn't want a S&L; crisis to happen on his watch," said Mr. Donaho, referring to the regulatory fiasco that occurred seven years ago when Maryland's private insurance system for savings and loans collapsed.
Mr. Donaho's involvement in public service began early in Chicago where he was instrumental in getting the legendary Mayor Richard J.
Daley to set up a youth advisory committee.
He graduated from the University of Chicago and then worked with Commonwealth Edison, the city's public utility.
In 1942, he joined the Roosevelt administration as a budget officer. Since then, he has worked in government off and on. He was the youngest city manager of Richmond, Va.
An expert on city charters and budgeting, he has taught government courses at the Johns Hopkins University for several decades and is seen as an intellectual in the Schaefer administration.
Beginning in the early 1970s, Mr. Donaho worked as a consultant to the city of Baltimore, tackling thorny and politically charged problems like worker's compensation.
He quickly earned a reputation as a man who "got a charge out of shooting down sacred cows," according to one associate.
Unlike most of his predecessors, Mr. Donaho has never worked in the insurance industry. While some say he has been too cozy with the industry, others such as Janelle Cousino, a former consumer health advocate, say he's really middle-of-the-road.
"He's just a very bright man. It's hard to snow him," said Ms. Cousino, now executive director of the Maryland Trial Lawyers Association.
She said his overriding concern as commissioner has been the solvency of the state's insurance companies.
"He's been concerned about Blue Cross for a couple of years," Ms. Cousino said.
"He didn't think the HMOs were doing as well as Blue Cross was portraying them," she said.
Blue Cross officials say that in an increasingly tough marketplace, they have been forced to branch out and form subsidiaries to compete with commercial insurers who they say cream off the healthiest subscribers. During the 1980s, Blue Cross got into the managed care business through a number of health maintenance organization subsidiaries.
Mr. Donaho was incensed by the company's violation of a 1988 order requiring the insurer to notify his division whenever it formed a new subsidiary.
Sources say his frustration has caused an oil-and-water relationship between himself and Carl Sardegna, chairman and chief executive of the Maryland Blues, who declined to comment for this article.
The contrast between Mr. Donaho and Mr. Sardegna is in itself striking. Mr. Sardegna is smooth, conciliatory, diplomatic and well-paid -- to the tune of $706,000 last year alone.
During last week's hearing in Annapolis, Mr. Donaho sat sphinxlike, occasionally muttering "b" to his deputy commissioner as Mr. Sardegna spoke about the Blues' subsidiaries.
Despite strong urging from the governor's office, the commissioner in his own brief testimony failed to specifically tell the committee that Blue Cross was solvent.
As governor's aides hovered near the committee door, Mr. Donaho would say only that the company "has a cash flow pipeline" and subscribers could feel comfortable.
In an interview last week, Mr. Donaho went a qualified step further, saying:
"According to figures submitted to us and to the National Association ofInsurance Commissioners by Maryland Blue Cross, they are solvent. That is all we have to go on," he said, noting that the state's triennial examination of the Blues would begin in October.
Mr. Donaho termed his recent agreement with Blue Cross as "a positive step which signifies their willingness to live with the regulatory framework."
In the end, the insurance commissioner may have used his testimony "to leverage out of the Blues information he couldn't get otherwise," Mr. O'Reilly said.
"If that was his ultimate goal, he's now achieved it," he said.
"Maybe he's just up there laughing saying, 'Heh, it took me a while, but I got it.' "