Schaefer to seek advice on Blues He says he'll hire independent counsel

Months after state and federal officials expressed grave concerns about the financial condition of Blue Cross and Blue Shield of Maryland, Gov. William Donald Schaefer wants to hire an independent counsel to advise him on the insurer's health.

Mr. Schaefer has said little publicly about the Blues' financial troubles, which have received critical attention from state regulators, congressional investigators and the media.


But yesterday, Mr. Schaefer told listeners of his weekly radio talk show that, in the past, he was continually assured by state Insurance Commissioner John A. Donaho that Maryland's largest health insurer was solvent.

However, he added, questionable company practices -- revealed congressional reports and in the media -- have led him to seek independent advice on the Blues.


Yesterday, he told a radio show caller: "You are right to be concernedbut I hope not overly concerned." The governor also intimated his displeasure with Mr. Donaho for taking his concerns public in July.

"Unfortunately, he went to Congress and testified, caused a little bit of a problem with that . . . ," Mr. Schaefer told the caller as he explained his decision to hire an attorney.

Asked if the governor was dissatisfied with Mr. Donaho's handling of the Blue Cross matter, Page W. Boinest, the governor's acting press secretary, replied: "At this time, he's more comfortable getting advice in addition to the insurance commissioner."

She further explained that Mr. Schaefer "has some concern now because for two years he's been hearing that they [the Blues] can meet their [financial] obligations. That's been called into question now. He feels it's his duty to seek another opinion. He's looking for some reassurance."

State regulators are examining the condition of the insurer. The Blues have been reporting improving business results but acknowledge that cash available to pay claims has fallen to historically low levels. Further, state regulators are studying whether to force the Blues to make accounting changes that would significantly lower the stated value of its reserves -- the assets available to pay claims in an emergency.

The insurer's board was expected to make public today its recommendations for improving the company's finances and management.

During yesterday's radio show, Mr. Schaefer said he hoped an independent adviser would "look into some of the [Blues'] problems" and "alleviate some of the misinformation . . . we're getting."

Mr. Schaefer didn't say when he would hire the lawyer. The independent counsel would be paid for with state money, Ms. Boinest said.


Mr. Donaho, who stated his worries about the Blues' financial condition in testimony to Congress in July and who has repeatedly tried to reign in the company's forays into unsuccessful businesses, could not be reached for comment last night.

Mr. Schaefer announced his decision as the Blue Cross board met in closed door session to assess an internal company review of a Senate subcommittee's findings in September regarding excessive spending, questionable management practices and poor service at the insurer.

The governor's action came three months after Mr. Donaho described the Blues' financial condition as "generally poor" in a letter to the governor but recommended against finding the company insolvent.

It was unclear yesterday just what services a lawyer would provide to the governor.

At the state insurance division, Mr. Donaho has assembled a team of six examiners, to study the company's finances.

State regulators began expressing serious concerns about the company's financial condition more than a year ago.


In July, Mr. Donaho told Senate investigators that he could not accurately judge the Blues' financial condition because the insurer had refused to provide sufficient information. Soon after, the Blues and Mr. Donaho reached an agreement to work more cooperatively and exchange more data.