Insurance regulator draws fire over HMOs


Top Democratic lawmakers blasted Maryland's insurance regulator yesterday for allowing HMOs to pass a 2 percent tax increase on to consumers without a close examination of industry finances, and a leading delegate called for a boycott of higher insurance bills until the costs can be justified.

"I would encourage those who have been notified of the rate increases to simply not pay them, and if they are threatened with cancellation, to appeal them to the insurance commissioner," said Del. John Adams Hurson of Montgomery County, chairman of the House Health and Government Operations Committee. "They simply have not been approved in a legal manner."

Yesterday, Hurson received a letter from an assistant attorney general suggesting that the insurance commissioner, Alfred W. Redmer Jr., should follow a regulatory process that could include public hearings and financial submissions before allowing companies to charge policy-holders more.

An assistant attorney general who works for the Maryland Insurance Administration disagreed with Hurson's interpretation of the law.

Last month, the General Assembly approved the removal of a tax exemption for health-maintenance organizations, making them subject to the same 2 percent premium tax paid by other insurance providers.

The $65 million annual proceeds are to be used to subsidize the rising medical malpractice premiums of doctors, ideally dissuading them from abandoning their practices.

Two days after the Assembly gave final approval to the plan by overriding Gov. Robert L. Ehrlich Jr.'s veto of the bill, Redmer wrote to HMOs to tell them they could pass the premium increase on to consumers by giving 45 days notice.

The Sun reported yesterday that HMO operators Mid Atlantic Medical Services, Aetna Inc. and Kaiser Permanente have scheduled rate increases in March and April, and have begun informing customers.

Cost to consumers

The increases are expected to cost families about $200 a year.

A former House Republican leader and appointee of Ehrlich, Redmer has said through spokesmen that he followed the law regarding the increases. He was traveling yesterday and could not be reached for comment.

But lawmakers said Redmer appeared to make a political decision to support Ehrlich and harm consumers by allowing the speedy approval of the rate increases.

"This so-called insurance commissioner took off his insurance commissioner's hat and put on his partisan Republican campaign hat," said Senate President Thomas V. Mike Miller. "Instead of representing the people of the state of Maryland, he has demonstrated over and over that this administration is in bed with big corporations."

"There should be nothing passed on whatsoever," Miller said. "To allow this to be passed on without a regulatory hearing is a flimflam. It's scandalous."

Shifting blame?

Del. Anthony J. O'Donnell, the House minority whip from Southern Maryland, said consumers have been harmed not by Redmer's decisions but by the actions of a Democrat-controlled legislature.

"It is ridiculous now for those who cranked up the tax to try to blame it on somebody else," O'Donnell said.

Miller and other lawmakers said regulatory hearings would reveal the reserve holdings of HMOs and also would show the overall impact of the malpractice law.

The legislation imposing a 2 percent tax also exempted the HMO providers from paying state corporate income tax, which would mitigate the new levy, they said. And if malpractice bills aren't rising as fast, insurance companies might be able to save money by reconsidering their payments to doctors, Miller and others said.

"It looks like he [Redmer] was proactive in notifying the insurance companies and saying, 'You could pass this on,'" said Sen. Thomas M. Middleton of Charles County, chairman of the Senate Finance Committee.

The premium tax issue was the most contentious component of a medical malpractice reform plan approved by the Assembly last month during a special session called by Ehrlich. Ehrlich opposed the tax, saying low-income residents would bear the burden.

Joseph Steffen, a spokesman for the Maryland Insurance Administration, said Redmer was out of town at an insurance conference but would be happy to answer lawmakers' questions when he returns.

Industry representatives appeared reluctant to enter the fray.

Walter Cherniak, an Aetna spokesman, said he was "in no position to comment" on disagreements between Redmer and legislators as to the application of insurance law and regulations.

Staff writer M. William Salganik contributed to this article.

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